Investing.com -- EUR/USD fell mildly on Wednesday before paring the losses on a choppy day of trading, amid reports that the European Central Bank may consider purchasing municipal bonds throughout the euro zone as a mechanism for spurring economic growth.
The currency pair traded between 1.0706 and 1.0774 before settling at 1.0742, up by 0.0018 or 0.17% on the session. It came one day after the euro tumbled to a six-month low against the dollar amid increasing likelihood that the Federal Reserve will raise short-term interest rates when it meets next in December. After nearly reaching 1.15 in mid-October, the euro has lost more than 5% against the dollar. EUR/USD likely gained support at 1.0519, the low from April 13 and was met with resistance at 1.1496, the high from Oct. 15.
On Wednesday morning, Reuters reported that the ECB is exploring the possibility of purchasing municipal bonds in the City of Paris and several cities in Germany in an effort to expand the scope of its €1.1 trillion quantitative easing program. After selling more than $75 billion in bonds in 2014, European cities and regions currently have nearly $500 billion in bonds in circulation, according to data obtained by Reuters. The ECB could approve further stimulus measures when its Governing Council meets next in early-December.
ECB president Mario Draghi, meanwhile, offered no hints on the possible expansion of the asset purchasing program during an appearance at the Bank of England's Open Forum on Wednesday. Some investors had hoped that Draghi would use his speech as a means for further devaluing the euro by providing clues on the monetary tools the ECB could consider next month to help stimulate growth. Instead, Draghi reiterated the importance of European integration, specifically in the banking sector, as speculation of the United Kingdom's eventual departure from the European Union continues to proliferate.
Investors await the start of the Federal Reserve's two-day conference on Monetary Policy Implementation and Transmission in the Post-Crisis period on Thursday for stronger indications on the growing possibility of a December rate hike. Fed chair Janet Yellen is scheduled to make the opening remarks on Thursday morning, while Fed chair Stanley Fischer is scheduled to deliver a speech on the transmission of exchange rates to output and inflation on Thursday evening. In total, six members of the Federal Open Market Committee are scheduled to speak on Thursday. Last week, Yellen told a Congressional hearing that an interest rate hike will be a "live possibility" at its December FOMC meeting if the economy and labor market demonstrated continued improvement over the next several weeks.
While U.S. equity markets remained open on Wednesday, banks, government offices and bond markets were closed for the Veterans Day holiday.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell steadily on Wednesday one day after surging above 99.50 to reach a fresh seven-month high. The index closed Wednesday's session at 99.06, down 0.35%.