Yen extends slide, euro steady as all eyes on ECB meeting

By Alun John

HONG KONG (Reuters) – The yen dropped to a 20-year low on the dollar on Thursday, though most major currency pairs traded cautiously ahead of a highly-anticipated meeting by the European Central Bank, which should offer insights into its monetary policy tightening plans.

The ECB is all but certain to flag an end to its long-running asset purchase programme at the end of this month, and promise a rate hike for July, but the size and pace of its tightening are uncertain.

Speculation is growing that red hot euro zone inflation could push the ECB into kicking off its hike campaign with a large 50 basis point rate increase.

The euro was little changed at $1.07130 on Thursday, having moved very little this week.

In the event ECB President Christine Lagarde “leans into a more hawkish interest rate move in the future, that’s going give a boost to euro-dollar,” said Carol Kong, currency strategist at Commonwealth Bank of Australia (OTC:CMWAY).

“I don’t think a rate hike today is very likely, as the ECB has talked a lot about sequencing and said it will stop asset purchases before raising interest rates, but given that inflation is at a record high and the economic rationale for a rate hike is there, I would not completely rule it out,” she added.

Policy announcements are due at 11.45 GMT with a press conference scheduled for 12.30 GMT.

Elsewhere the yen extended its slide, falling to a fresh 20-year low of 134.56 yen per dollar in early trade.

It is nearing the 135.20 hit on Jan. 31, 2002, and a break past that would be its lowest since October 1998.

It is also trading at 143.72 per euro, around a seven-and a half year low.

The yen has been weighed down by rising interest rates around the world at a time when the Bank of Japan remains wedded to keeping policy highly stimulatory, as has Japan’s shrinking current account surplus.

Sterling was steady at $1.2534, and the risk-friendly Australian dollar was a touch softer at $0.7178, in line with lower share markets. [MKTS/GLOB]

The dollar index was a fraction higher at 102.59.

In cryptocurrencies, bitcoin continues to revolve around the $30,000 level, as it has done so for the past several weeks. It was trading a whisker firmer at $30,200 on Thursday.