Euro lower ahead of ECB; NZ dollar sinks 2% on rate cut

[NEW YORK] The euro was slightly lower against the US dollar but up on the yen Wednesday ahead of a European Central Bank meeting expected to further ease monetary policy.

Meanwhile the New Zealand dollar plunged 2.0 per cent after the central bank unexpectedly cut interest rates to counter lower inflation.

The euro slipped to US$1.1001 but rose to 124.69 yen, while the dollar climbed to 113.35 yen.

The British pound was also marginally higher at US$1.4218.

The New Zealand dollar was at 66.4 US cents at about 2200 GMT after the Reserve Bank's fifth rate reduction since June.

"Further policy easing may be required... we will continue to watch closely the emerging flow of economic data," Governor Graeme Wheeler said.

In Europe, analysts expect the ECB to announce new stimulus measures in the face of very weak inflation and sagging growth, amid rising questions over whether its already-negative interest rates are achieving anything.

ECB President Mario Draghi "faces difficult challenges - responding to disinflationary pressures in the euro area without fueling concerns that the central bank is running out of ammunition, and calibrating additional monetary policy support without adversely impacting banks," said analysts at the Institute of International Finance.

"Markets are clearly expecting the ECB to act."

Most expect a 10-15 basis point cut in the ECB's benchmark rate, now at -0.3 per cent, and an increase in its quantitative easing bond purchases, to inject more cash into the eurozone economy.

AFP