April 17, 2013 / 3:26 PM / 5 years ago

FOREX-Euro tumbles on ECB rate cut speculation; yen slips

* Weidmann says ECB may cut rates if economy weakens - WSJ

* G20 meeting seen unlikely to criticise BOJ policy

* Canadian dollar slumps after BOC cuts growth forecast

By Wanfeng Zhou

NEW YORK, April 17 (Reuters) - The euro tumbled against the dollar and yen on Wednesday after comments from a European Central Bank official stoked speculation of an interest rate cut in the euro zone.

The yen slipped against the dollar a day before the Group of 20 economies meets in Washington. Analysts said recent comments from G20 officials suggest the group as a whole will not criticize Japan’s aggressive monetary easing that has triggered a sharp slide in its currency.

The ECB could lower interest rates further if economic data so warrants, ECB Governing Council member Jens Weidmann was quoted by the Wall Street Journal as saying on Wednesday.

“The ECB is a central bank that likes to prepare the market for any potential changes in monetary policy and that is why Weidmann’s comments are so important because it could be the first of many to follow,” said Kathy Lien, managing director at BK Asset Management in New York.

The euro fell 1 percent to $1.3040, having hit a session low of $1.3035, according to Reuters data. Support lies around $1.3020, the low set on Friday, and a break could open the door for a decline towards $1.30 and below.

The ECB decided to leave interest rates on hold at its April policy meeting, but ECB President Mario Draghi said the bank would “monitor very closely” all data and stand “ready to act” to boost the recession-hit euro zone.

Recent economic data has underscored a challenging outlook for the euro zone economy. Inflation in the euro zone eased further in March, while analyst and investor sentiment in Germany, the bloc’s largest economy, fell sharply in April.

The euro also came under pressure after a media report cited former member of the ECB Executive Board Lorenzo Bini Smaghi as saying the central bank should find ways to stop the euro from gaining.

Against the yen, the euro fell 0.9 percent to 127.32 yen .

The dollar rose 0.1 percent to 97.59 yen, although it remained well below the four-year high of 99.94 yen set on Reuters data last week.

“Dollar/yen has moved a bit higher, trying to hold the 98 level, as traders now expect that the G20 meeting later this week will not be as ‘difficult’ for the Japanese delegation as first suspected,” said Matthew Lifson, senior trader and analyst at Cambridge Mercantile Group in Princeton, New Jersey.

“Most predictions for the dollar/yen still expect a test of the 105.00 level by mid-summer as ‘Abenomics’ continues in Japan,” he said, referring to Japan’s new push to ease monetary policy under prime minister Shinzo Abe.

The Canadian dollar tumbled after the Bank of Canada cut its growth forecast and left interest rates unchanged. The U.S. currency rose 0.7 percent to C$1.0274.

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