Investing.com -- EUR/USD rallied from two-and-a-half week lows on Wednesday, after Mario Draghi suggested a downturn in the global economy has left the European Central Bank uncertain on whether to extend the scope of its comprehensive asset-purchasing program.
The currency pair traded in a range between 1.1105 and 1.1213, before settling at 1.1180, up 0.0052 or 0.47% on the session. After falling to its lowest level since early-September, the euro pared earlier losses against the dollar to end a four-session losing skid. Over the last month of trading, the euro is still down by more than 1.75% against its American counterpart.
EUR/USD likely gained support at 1.1088, the low from Sept. 3 and was met with resistance at 1.1625, the high from Aug. 25.
Speaking in Brussels before the European Parliament's Committee on Economic and Monetary Affairs, Draghi indicated that a slowdown in the Chinese economy and crashing oil prices have made it difficult to forecast the long-term path of inflation throughout the euro zone. Draghi, the president of the ECB, was widely expected on Wednesday to expand the bank's EUR 60 billion a month quantitative easing program beyond next September.
"The asset purchase program has sufficient in-built flexibility," Draghi said. "We will adjust its size, composition and duration as appropriate, if more monetary policy impulse should become necessary."
Also on Wednesday, Markit's euro zone composite PMI index, which factors both manufacturing activity and services, slid to 53.9 in September, down 0.4 from its reading a month earlier.
It came hours after the release of the Flash China Caixin Manufacturing Purchasing Index, a preliminary gauge of Chinese factory activity. For the month of September, the index fell to 47.0, marking its lowest level in 78 months. New orders dipped by 0.6 to 46.0, while new export orders plummeted 0.8 to 45.8. Analysts expected the index to tick up slightly to 47.5 from a final reading of 47.3 in August. The regression in manufacturing activity in September represents the seventh straight month of monthly declines.
Any reading below 50 provides signals of imminent contraction.
Last week, Fed chair Janet Yellen noted that heightened concerns about growth in China and a number of emerging markets have contributed to increased volatility in the global economy. On Thursday evening, Yellen is scheduled to speak on inflation dynamics and monetary policy during an appearance at the University of Massachusetts-Amherst.
Yields on the U.S. 10-year gained two basis points to 2.15%, while yields on the Germany 10-year inched up one basis point to 0.59% following Draghi's comments.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, ticked down 0.09% to close at 96.37. Earlier, the index reached an intraday high of 96.71, its highest level in more than a month.