* Euro softer against many of its peers but up versus yen
* ECB could loosen policy at Thursday’s review
* Aussie dollar holds gains after upbeat local data
By Ian Chua
SYDNEY, March 6 (Reuters) – The euro stayed on the defensive
early on Thursday, having lost ground against many of its peers
as investors made short shrift of the common currency ahead of
possible policy easing by the European Central Bank.
Market concerns about Ukraine continued to simmer in the
background with high-level diplomatic efforts to resolve the
crisis making little apparent headway so far.
The euro last stood at $1.3736, having slipped as far
as $1.3707 overnight. It was also down against sterling
and the Australian dollar but managed to
drift up versus the yen to 140.43.
“We think Thursday will be a big day for euro bears, with
the ECB likely to deliver significant policy easing measures,
weakening the currency,” analysts at BNP Paribas wrote in a note
to clients.
There is talk the ECB may loosen monetary policy by ending
so-called sterilisation of its bond purchases that could release
around 175 billion euros ($242 billion) into the financial
system.
That should bring down interbank lending rates and could
also knock the euro lower against the U.S. dollar. The ECB will,
for the first time, publish staff forecasts stretching into
2016.
BNP economists expect the ECB to cut rates as well.
With the euro on the back foot, the U.S. dollar index
climbed to its highest for the week at 80.272. It has since
retreated to 80.071, partly due to disappointing U.S. data.
Reports on Wednesday showed U.S. private employers added
fewer workers than expected in February and growth in the
services sector slowed. All eyes are now on non-farm payrolls
due on Friday.
Against the yen, the greenback stood at 102.32,
continuing to pull away from Monday’s trough of 101.20. Talk of
maturities in dollar/yen options could inject a bit of
volatility in the pair, traders said.
A notable performer overnight was the Australian dollar,
which hit a one-week high near 90 U.S. cents after
local data showed the economy sped up more than expected in the
fourth quarter.
The Aussie could build on that head of steam if retail sales
data due at 0030 GMT showed further strength in consumer
spending. It was last at $0.8987.
