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FOREX-Euro falls vs dollar, yen on ECB uncertainty

Published 04/20/2009, 04:14 AM
Updated 04/20/2009, 04:24 AM

* Euro falls; hits 1 mth low vs dlr, 3-wk low vs yen

* Trichet signals rate cut, no details on further measures

* Uncertainty over ECB steps, EZ economic worries dent euro

(Updates prices, changes byline, dateline; previous TOKYO)

By Jessica Mortimer

LONDON, April 20 (Reuters) - The euro fell against the dollar and the yen on Monday on uncertainties over the next policy steps the European Central Bank will take to stimulate the economy.

ECB President Jean-Claude Trichet signalled on Sunday that the bank was likely to cut interest rates by 25 basis points from their current 1.25 percent on May 7, but gave no details of plans for unconventional measures.

Uncertainty over what form these measures will take, coupled with concerns the euro zone economy remains weak while the U.S. shows signs of recovery, earlier pushed the euro to a one-month low against the dollar and a three-week low versus the yen.

Market players are keen to see whether the ECB will follow the Federal Reserve, the Bank of England and the Bank of Japan in making asset purchases to contain the financial crisis.

Further downbeat comments came from ECB Executive Board member Lorenzo Bini Smaghi, who warned against overstating the risks of deflation in an interview with the Financial Times Deutschland on Monday.

"There are worries about what the ECB will do, and also that they may have been too hesitant to introduce these measures," Frankfurt-based Commerzbank currency strategist Antje Praefcke said.

"We are also seeing some dollar strength due to the view that the U.S. may come out of the crisis first," she added.

At 0745 GMT, the euro fell 0.3 percent against the dollar to $1.2998, just shy of an earlier trough of $1.2967 hit earlier on the EBS trading platform, its lowest since March 17.

The single currency also lost 0.4 percent against the yen to 128.66 yen, having earlier hit a three-week low of 128.14 yen on EBS. The dollar dipped 0.2 percent against the yen to 98.97 yen .

Monday is a quiet day for data, but investors will be watching the release of German ZEW and Ifo surveys, as well as euro zone purchasing managers' indices, later in the week, where weak readings could further dent the single currency.

"The euro looks set to fall further, following the same path as the dollar, sterling and the yen did when they faced month-long selling after their central banks adopted unconventional measures," said Kengo Suzuki, a currency strategist at Shinko Securities in Tokyo.

Trichet said on Friday that euro weakness did not reflect the current situation and that he appreciated U.S. comments that a strong dollar was in U.S. interests.

Elsewhere, the euro recovered against the Australian dollar after falling to its lowest level since early October overnight.

Traders in Tokyo said expectations that Asian and Oceanian countries will recover faster than European countries due to resilience in the Chinese economy could continue lending strength to the Aussie against the euro in the long run. (Reporting by Jessica Mortimer; Editing by Toby Chopra)

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