Euro gains before ECB meeting, US dollar declines

London

THE euro ticked higher before a meeting of the European Central Bank (ECB) on Thursday, with the US dollar declining versus major peers as plans for a massive US stimulus package fuelled market optimism and sapped demand for safe-haven currencies.

Stock markets reached record highs on Wall Street and in Asia following the inauguration of Joe Biden, amid hopes the 46th president of the United States would secure a US$1.9 trillion package to prop up the Covid-hit economy. The US dollar index slipped 0.2 per cent to 90.240, declining for a third day after touching a nearly one-month high of 90.956 on Monday.

The euro gained 0.2 per cent, reversing a similar decline from the previous session, to trade at US$1.2134 about four hours before the ECB's policy announcement at 12.45pm GMT. "We don't expect many fireworks from the ECB meeting", ING strategists said, foreseeing "a fairly uneventful day for the euro".

Many analysts expect the US dollar to continue its downtrend trend, which saw it lose nearly 7 per cent in 2020 amid ultra-loose US monetary policy and hopes for a post-pandemic global recovery.

"While the idiosyncratic euro story remains unexciting (the eurozone will not outperform the US economy this year, and any ECB policy normalisation is a very distant story), we expect the bearish dollar dynamics to dominate", the ING strategists said.

The greenback also lost 0.1 per cent at 103.505 yen on Thursday, after dipping to a two-week low of 103.33. The Bank of Japan kept monetary policy unchanged on Thursday while revising up its economic forecast for next fiscal year.

Norway's central bank left its key policy interest rate at a record-low zero per cent on Thursday, as expected, and said the economy was developing largely as anticipated.

Norges Bank has said it plans to raise rates early next year as the economy recovers from the coronavirus pandemic, which could make it the first among G-10 central banks to raise the cost of borrowing.

The Aussie dollar rose 0.2 per cent to 77.62 US cents, adding to a 0.7 per cent rally in the previous session. Australia boasted another solid rise in employment in December, data released on Thursday showed.

The US currency slipped against the Canadian dollar, down 0.13 per cent to C$1.2618 after the Bank of Canada opted not to cut interest rates. REUTERS