The euro weakened in Asia Thursday as markets looked to a European Central Bank meeting as the next key trading peg after the US presidential election and approval of a Greek austerity package. The single currency bought $1.2760 and 101.92 yen in Tokyo trade, from $1.2767 and 102.09 yen in New York late Wednesday after the European Union cut its economic growth forecast and the ECB chief stoked worries about how slowing growth is hurting the continent’s top economy, Germany.
The dollar weakened to 79.87 yen, from 79.96 yen in US trade. The greenback tumbled in Asian trade Wednesday as dealers bet that under the re-elected President Barack Obama the US Federal Reserve would continue its loose monetary policy that has seen it flood markets with billions of dollars, which weighs on the greenback. Investors were focused on the ECB’s policy meeting later Thursday and a press briefing by its president, Mario Draghi, dealers said.
“Although the ECB is expected to stand pat on its monetary policy, the euro may come under pressure if Mr Draghi signals a chance of further easing amid the recent worsening of the eurozone economy,” said Daisaku Ueno, senior forex and fixed income strategist at Mitsubishi UFJ Morgan Stanley.
“In Asia, a wait-and-see stance will likely dominate before the events,” he told Dow Jones Newswires. On Wednesday, the Greek parliament passed austerity measures crucial to securing loans demanded by international creditors seen as necessary to keep its economy afloat.
Dollar-yen trade was little moved Thursday by new data showing a smaller-than-expected surplus in Japan’s September current account, the broadest measure of trade with the rest of the world. The new data are seen as a negative for the yen. Traders also focused on post-election developments in the United States, with fears that a divided Congress could again see deadlock on reforms, allowing a so-called “fiscal cliff” package of spending cuts and tax hikes to take effect on January 1. If Congress fails to agree how to cut spending over the medium term, there will be automatic deep spending cuts that could tip the United States back into recession, in a major blow for the slowing global economy.
