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Euro hit by weaker data as ECB keeps rates on hold

London

THE euro erased its earlier gains on Thursday after business surveys pointed to stagnating economic momentum in the euro zone, ahead of Mario Draghi's final news conference as president of the European Central Bank (ECB).

The ECB kept rates on hold and its ultra-easy monetary policy unchanged. Investors will be watching Mr Draghi's news conference from 1230 GMT for any reference to a rift among policymakers about stimulus plans designed to reinvigorate the economy.

The weakness of business in the region was reaffirmed on Thursday when IHS Markit's flash composite purchasing managers' index for October, seen as a good guide to economic health, came in below forecasts and perilously close to the line separating growth from contraction.

The euro was unchanged after the ECB's decision. It had earlier given up initial gains on the weaker than expected Purchasing Managers' Index and was last flat on the day at US$1.1126, having earlier traded at US$1.1163. The dollar index was flat on the day at 97.498.

"Today is going to be all about the ECB," said Rabobank FX strategist Piotr Matys. "We don't expect the ECB to change the parameters of its monetary policy," but Mr Draghi may use his last meeting to encourage governments to use fiscal measures to propel growth.

Central bank meetings on Thursday included the ECB, the Swedish Riksbank and Norway's Norges Bank.

The Swedish crown rose to its strongest against the dollar since mid-August and gained 0.6 per cent against the euro after the Riksbank stuck to its plan for raising rates in December, though it said the rate path after that was not yet clear. It kept rates steady at -0.25 per cent.

The Norwegian crown slipped 0.1 per cent against the euro as the Norges Bank said rates were likely to be held at the current 1.5 per cent rate.

The decline was contained by the Swedish crown's rise. The Norwegian currency gained 0.1 per cent versus the dollar.

Most Asian currencies edged up in the absence of developments in the Sino-US trade war. The Australian dollar was down 0.2 per cent versus the US dollar and the New Zealand dollar fell as much as 0.4 per cent.

The pound weakened 0.2 per cent to US$1.2893, having chalked up 6 per cent gains since Irish and British leaders said they could "see a possible pathway to a deal" on Oct. 10. REUTERS

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