Dollar down vs. euro as focus turns to jobs report

New York (Jan 9)  The dollar was slightly weaker against the euro Thursday as investors digested remarks from European Central Bank President Mario Draghi and looked ahead to key U.S. employment data due Friday.

As expected, the ECB held its key interest rates steady on Thursday. Speaking in Frankfurt, Draghi emphasized that interest rates would stay at current or lower levels for an “extended period” and monetary policy would remain accommodative for as long as needed.

In response to a question on what could prompt action from the central bank, Draghi said easing could be triggered if the money market tightens or the inflation outlook worsens. The fact that he only emphasized what could cause easing underscores the bank’s focus, said Jens Nordvig, global head of currency strategy and head of fixed income research Americas at Nomura Securities.

“It almost feels as if [the ECB] is moving back to the tone in November, after sounding a bit too relaxed in December,” said Nordvig. In December, a month after cutting the benchmark interest rate, Draghi said the central bank didn’t have immediate plans for further easing.

The euro reacted to the press conference by swinging to a loss against the dollar, but has since recovered. In recent trade, the euro inched up to $1.3593 from $1.3575 late Wednesday.

Monetary policy has dominated foreign-exchange action, even more so since the Federal Reserve announced in December it would cut its monthly bond purchases to $75 billion in January from $85 billion. The Fed’s bond purchases have been understood to weigh on the dollar. Investors have renewed their focus on U.S. data as they try to figure out when bond purchases could completely end.

“The biggest trend here is that the dollar is getting stronger on a global basis,” said Nomura’s Nordvig, pointing to the improvement in economic data.

For the week ended Jan 4., U.S. jobless claims fell by 15,000 to 330,000. That’s the lowest level in five weeks, though figures are volatile during the holiday season. The government’s employment report, which includes the jobless rate, is due Friday.

The ICE dollar, which measures the greenback against six other currencies, was at 80.996 versus 81.069 on Wednesday.

The WSJ Dollar Index, a rival gauge, was at 74.28 versus 74.34.

Earlier, the Bank of England maintained the size of its bond purchases and kept its key lending rate at 0.5%, a record low where it has stood since March 2009. The central bank didn’t release a statement.

The pound  was little changed at $1.6459 versus $1.6450 late Wednesday.

The dollar traded at ¥104.76 recently versus ¥104.86 late Wednesday. The Australian dollar /quotes/zigman/4867876/realtime/sampled AUDUSD -0.17%  edged down to 88.87 U.S. cents from 89.02 U.S. cents .

In other action, the dollar rose to 1.0850 Canadian dollars from 1.0825 Canadian dollars late Wednesday. The dollar surged 6.7% against the Canadian dollar in 2013, with gains stemming the diverging growth stories between the two countries, said Nordvig.