Investing.com - The euro fell to session lows against the broadly stronger dollar on Wednesday as a victory for Republicans in the U.S. mid-term elections boosted the greenback and investors awaited the upcoming European Central Bank policy decision.
EUR/USD was down 0.46% to 1.2484, not far from the two-year trough of 1.2437 struck on Monday.
The greenback strengthened across the board after the Republican Party took control of the U.S. senate, riding a wave of voter dissatisfaction with President Barack Obama’s party at the polls.
The result boosted hopes for an end to political deadlock in Washington.
The ECB was expected to keep monetary policy unchanged at its monthly meeting on Thursday, but the Bank of Japan’s surprise stimulus move on Friday has fuelled expectations that it will soon follow suit in order to spur growth and inflation in the euro area.
Data on Wednesday showed that the euro zone composite services purchasing managers’ index, which measures activity across the region’s private sector, edged up to 52.1 from 52.0 in September, indicating only modest growth.
A separate report showed that euro zone retail sales dropped 1.3% from a month earlier in September, compared to expectations for a decline of 0.8%.
The single currency gained ground against the dollar on Tuesday after reports of tensions within the ECB over President Mario Draghi’s leadership style were seen as likely to limit its ability to implement additional monetary easing measures.
The euro was near seven month highs against the weaker yen, with EUR/JPY up 0.31% to 142.94 after rising as high as 143.45 earlier.
Elsewhere, the dollar was at seven year peaks against the yen, with USD/JPY advancing 0.77% to 114.48.
The yen showed little reaction to a speech by Bank of Japan Governor Haruhiko Kuroda, who said that a weak yen has various positive effects on the Japanese economy.
The US dollar index, which tracks the performance of the greenback against a basket of six major currencies, was up 0.50 % to four year highs of 87.60.