October 21, 2016 / 4:50 AM / 3 years ago

FOREX-Dollar stands tall after dovish Draghi pressures euro

* Euro wallows near March lows after Draghi quashes tapering talk

* Dollar index on track for weekly gains, notches 7-month high

TOKYO, Oct 21 (Reuters) - The dollar stood tall in Asian trading on Friday, on track for a weekly gain against a basket of currencies, as the euro wallowed at seven-month lows after the European Central Bank doused speculation that it would taper its stimulus.

The dollar index, which gauges the greenback against six major rivals, was up 0.2 percent at 98.476, up 0.5 percent for the week and near a session high of 98.564, its loftiest peak since March 10.

The euro slipped 0.2 percent to $1.0907, poised to shed 0.6 percent for the week after plumbing $1.0891 earlier on Friday, its lowest since March 10.

ECB President Mario Draghi left the door open to a wide range of policy options and emphasized that a long-awaited rise in inflation is predicated on “very substantial” monetary accommodation - giving markets no reason to believe the central bank was ready to talk about tapering its 1.7 trillion euro ($1.86 trillion) asset-buying program.

“Draghi didn’t clearly say that there would be additional stimulus in December, so even though the euro has sold off, it might not continue falling for long,” said Kumiko Ishikawa, senior FX analyst at Gaitame.Com Research Institute in Tokyo.

“But from a technical point, now that the June 24 low has been broken, the euro could have more room on the downside and target the March 10 low,” she said.

In contrast with the ECB, U.S. data on Thursday showed that U.S. home resales surged in September after two straight months of declines, giving investors more reason to bet that the U.S. Federal Reserve would hike interest rates as early as its Dec. 13-14 meeting.

Separate data showed that first-time filings for unemployment benefits rose more than expected to 260,000 last week, but the trend suggests the labour market remains strong.

The dollar added 0.1 percent to 104.09 yen, edging down 0.1 percent for the week.

“Maybe we’re just in a holding pattern ahead of the U.S. election,” said Bart Wakabayashi, head of Hong Kong FX sales at State Street Global Markets, adding that regional trading was likely a bit thinner than usual on Friday as Typhoon Haima battered Hong Kong, forcing authorities to shut all but essential services in the global financial hub.

Sterling was down 0.1 percent at $1.2238, on track to gain 0.4 percent for the week.

European Council chief Donald Tusk said EU leaders would not engage in negotiations on Britain’s exit from the bloc at Prime Minister Theresa May’s first summit in Brussels, ruling out any Brexit negotiations until Britain formally launches the exit process.

The pound shrugged off Tusk’s remarks that British Prime Minister Theresa May had confirmed that Brexit talks would be triggered by end-March 2017.

China’s offshore yuan, meanwhile, dropped to its lowest level in six years against the broadly stronger greenback.

$1 = 0.9152 euros Reporting by Tokyo markets team; Editing by Richard Pullin

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