October 19, 2016 / 1:25 PM / a year ago

FOREX-Euro weakens against dollar before ECB meeting

* Euro slightly weaker before ECB meeting on Thursday

* Fed policy in view for rate hike probability in December (Adds market action, changes dateline, previous LONDON)

By Karen Brettell

NEW YORK, Oct 19 (Reuters) - The euro weakened against the U.S. dollar on Wednesday, a day before the European Central Bank is due to meet, with investors focused on whether ECB President Mario Draghi will give any indications that the central bank will begin tapering its bond purchase program.

The ECB may discuss technical changes to its asset-buying scheme but a decision could be deferred until December when the bank will also decide whether to extend the scheme beyond March, sources familiar with the discussion said last week.

“Ahead of the ECB there’s a little bit of lightening up of the euro. There’s some focus on the possibility that Draghi will push back very aggressively against recent talk of tapering,” said Richard Franulovich, a senior currency strategist at Westpac Banking Corp in New York.

The euro slipped 0.11 percent against the greenback to $1.0966.

Any signals the ECB plans to reduce bond purchases could roil bond markets globally, and create volatility for currencies.

“If (Draghi) gives any signal in support of tapering at some point, that would be very toxic for fixed income globally,” Franulovich added.

The dollar has been largely tracking U.S. Treasury yields in recent weeks on the view that the Federal Reserve is likely to raise interest rates when it meets in December.

The greenback has rallied around 3 percent since the end of September, mirroring a climb in benchmark U.S. Treasury yields to a four-month high above 1.8 percent.

The dollar index against a basket of six major currencies was little changed on Wednesday after slipping slightly the two prior sessions as investors continued to evaluate the likelihood of a December rate hike, and took profits from the recent dollar rally.

The index was down 0.2 percent at 97.876.

Data on Wednesday showed that U.S. single-family starts surged in September, pointing to sustained housing market strength, even as a drop in the construction of multifamily dwellings pushed overall home building activity to a 1-1/2-year low. (Editing by Jeffrey Benkoe)

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