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Singapore - The euro strengthened for a third day against the dollar after European Central Bank (ECB) president Mario Draghi suggested further stimulus may not be required when policy makers meet in December.
A gauge of the dollar dropped before US payrolls data this week that will help the Federal Reserve determine whether to increase interest rates this year.
Bank of Japan (BoJ) Governor Haruhiko Kuroda and his colleagues refrained from boosting stimulus when they met at the end of last week. The Australian and New Zealand dollars erased earlier losses after a gauge of China’s manufacturing industry improved in October.
“Draghi is just making clear that he is open to any sensible policy option in December,” said Sean Callow, a currency strategist at Westpac Banking in Sydney. “A little caution on the bullish US dollar story is understandable into a week which includes non-farm payrolls and lots of Fed commentary.”
The euro gained 0.2% to $1.1029 as of 8:45 after rising 0.8% during the previous two sessions. The shared currency was little changed at ¥132.80. The dollar fell 0.2% to ¥120.41. The Bloomberg Dollar Spot Index weakened 0.2%.
Draghi interview
“If we are convinced that our medium-term inflation target is at risk, we will take the necessary actions,” Draghi said in an interview with Italy’s Il Sole 24 Ore published on Saturday.
“We will see whether a further stimulus is necessary,” he said, adding that it was “too early” to pass judgment on lowering the deposit rate further below zero.
The ECB chief, at a press conference in Malta on October 22, said the Governing Council would re-examine its current stimulus policies, including the size, duration and composition of its quantitative-easing program, when it meets on December 3. His US counterpart, Janet Yellen, and policy makers signaled last week they remain prepared to raise their key rate as soon as December.
Upside ‘limited’
“Euro-dollar’s upside will be limited this week because the risk the ECB introduces more aggressive easing measure is unlikely to diminish,” said Elias Haddad, a currency strategist at Commonwealth Bank of Australia in Sydney. “There is scope for US interest-rate expectations to adjust higher in support of the dollar this week.”
Hedge funds and other large speculators boosted bearish bets against the euro by 43 368 contracts to 105 934 in the week ended October 27, the biggest increase in Bloomberg data going back to the currency’s 1999 debut.
The Aussie and kiwi erased declines after Caixin Media and Markit Economics said their index of China manufacturing climbed to to 48.3 last month from 47.2 in September. Australia and New Zealand count China as their biggest trading partner.
The Australian currency was little changed at 71.42 US cents after being down as much as 0.4%. New Zealand’s currency was at 67.69c. It earlier fell as much as 0.7% to 67.32.
