Dovish Draghi, trade tensions lift dollar vs euro

NEW YORK (Reuters) - The dollar rose to a nearly six-week high against the euro on Thursday after European Central Bank President Mario Draghi said economic risks have moved to the downside and near-term data is likely to be weaker than previously anticipated.

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The dollar was also helped by investors looking for safety after U.S. Commerce Secretary Wilbur Ross said the United States and China are “miles and miles” from resolving trade issues even though there is a fair chance the two countries will get a deal.

On Thursday, the ECB left its policy stance unchanged as expected, keeping a rate hike later this year on the table even as the euro zone economy suffers its biggest slowdown in half a decade.

“The risks surrounding the euro area growth outlook have moved to the downside on account of the persistence of uncertainties,” Draghi told a news conference, citing trade and geopolitical threats and emerging market volatility.

“The main takeaway is that the ECB was dovish today,” said John Doyle, vice president of dealing and trading at Tempus, Inc in Washington.

“Saying that the outlook has moved to the downside is not surprising, but it will weigh on the common currency,” Doyle said.

The euro was 0.7 percent lower against the dollar at $1.13, after falling as low as $1.129, its weakest since Dec. 14.

“We definitely feel this opens the door for a little bit more downside risk in the euro with economic data continuing to be more on the weak side,” said Charles Tomes, associate portfolio manager at Manulife Asset Management.

The euro steadied a little after Draghi downplayed deploying long-term refinancing operation funding (LTRO), but slipped again after comments from U.S. Commerce Secretary Ross highlighted how far Washington and Beijing were from a potential deal. “Brexit, dovish ECB, government shutdown and continued Chinese trade tensions helped the buck on general flight to safety,” said Tempus’ Doyle.

The dollar index , which tracks the greenback versus the euro, yen, British pound and three other currencies, was up 0.47 percent at 96.579.

The Republican-led U.S. Senate planned votes on Thursday for competing proposals to end the partial government shutdown - both of which were likely to fail - as lawmakers and the White House sniped at each other over how to break their month-long impasse.

The dollar was also helped by data that showed the number of Americans filing applications for unemployment benefits fell to a more than 49-year low last week.

Britain’s pound was 0.12 percent lower against the greenback after surging to an 11-week high overnight as investors consolidated positions before a key UK parliament debate next week.

Reporting by Saqib Iqbal Ahmed in New York; Editing by James Dalgleish