US dollar edges off lows against euro, central banks eyed

[NEW YORK] The US dollar rose against the euro on Wednesday a day after touching a more than one-year low, but it hit a more than three-week low against the yen as traders awaited meetings of the European Central Bank and the Bank of Japan.

Market watchers will be looking to see if the recent strength of the euro and the yen influence policy outlooks from the European and Japanese central banks.

The ECB meets on Thursday and is expected to adjust its language as it gets closer to normalising policy. That may include dropping a reference to its readiness to extend or expand its bond-buying programme.

Analysts, however, said the central bank would likely delay significant details on its plans to taper its asset-purchase programme until September. The expectation of a tight-lipped ECB weighed on the euro.

The euro was last at US$1.1517, near the session low of US$1.1511 and down about 0.3 per cent. But it was still near Tuesday's more than one-year high against the greenback of US$1.1583.

"Most sensible commentary is rightly pointing out it's doubtful Draghi will deliver anything tangible in terms of a tapering tomorrow," said Richard Franulovich, senior currency strategist at Westpac Banking Corp in New York, referring to ECB President Mario Draghi.

The US dollar index, which measures the greenback against a basket of six rival currencies, was last up 0.2 per cent at 94.791, not far from the more than 10-month low struck Tuesday of 94.476.

The US dollar index remained near Tuesday's lows after Republicans failed late on Monday to pass a healthcare bill, raising doubts about President Donald Trump's agenda, and as markets have begun to doubt the Federal Reserve's ability to hike interest rates again this year given weak US economic readings.

The US dollar was down 0.2 per cent against the yen after touching 111.56 yen, its weakest level against the Japanese currency since June 27.

"FX investors had a very substantial long dollar/yen position," said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets in New York.

"I think they're just squaring up ahead of the BOJ," he said.

"There's always risk" surrounding the central bank's possible signals, Mr Anderson said.

The Bank of Japan began a two-day policy meeting on Wednesday.

Under governor Haruhiko Kuroda, the BOJ in 2013 adopted an aggressive stimulus programme with the aim to lift inflation to 2 per cent in about two years and pull Japan out of prolonged deflation.

REUTERS