Euro dips against US dollar on dovish ECB tone

[NEW YORK] The euro dipped against the US dollar on Thursday after European Central Bank chief Mario Draghi said policymakers did not discuss removing the bank's easing bias on monetary policy, while the US dollar jumped against the Swedish crown after the Riksbank extended its bond-buying.

The euro initially rose to a session high of US$1.0932 on language in the ECB's statement, read by Mr Draghi, which said the euro zone's recovery was increasingly solid and downside risks had diminished.

But other parts of the statement and Mr Draghi's replies to questions stressed the barriers the ECB still faces before beginning to tighten the ultra-loose financing conditions it has maintained for nine years.

"Draghi wasn't as hawkish as people had hoped," said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets in New York.

"Upside event risk for the euro is gone," he added, noting that there was a tendency to bet against the euro in part given the likelihood of centrist Emmanuel Macron defeating anti-EU candidate Marine Le Pen in the final round of France's presidential election.

The euro was last down 0.3 per cent against the US dollar at US$1.0875, near a session low of US$1.0852.

Sweden's Riksbank extended its bond-buying and predicted its first interest rate hike in mid-2018, later than previously projected. That sent the US dollar as much as 1.3 per cent higher against the Swedish crown to a session peak of 8.8730 crowns per US dollar.

The Bank of Japan also signalled it would maintain its massive stimulus effort, despite offering its most optimistic assessment of the Japanese economy in nine years.

Governor Haruhiko Kuroda conceded that public perceptions of future price increases remained subdued, which disappointed some traders hoping for a more hawkish inflation outlook and pushed the US dollar higher against the yen.

"That lower inflation forecast would suggest continued accommodative monetary policy," said Eric Viloria, currency strategist at Wells Fargo in New York.

The US dollar was last 0.2 per cent higher against the yen at 111.22 yen after rising as much as 0.5 per cent to a session high of 111.59.

The US dollar index, which measures the greenback against a basket of six major rivals, was last up 0.1 per cent at 99.104.

The US dollar was down 0.8 per cent against the Mexican peso at 19.0300 pesos after US President Donald Trump said he would not scrap the North American Free Trade Agreement (Nafta).

REUTERS