Tuesday April 22, 2014 - 21:12:14 GMT
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Reuters - www.reuters.com
FOREX-Dollar strength ebbs, threats of ECB action keep euro subdued
* March U.S. existing home sales dip less than expected
* ECB's Draghi speech may weigh on euro
* Euro zone PMIs and German IFO a key focus (Updates with late New York prices)
By Daniel Bases
NEW YORK, April 22 (Reuters) - Investors trimmed U.S. dollars positions on Tuesday after a two-week run higher, unmoved by a U.S. March existing home sales report that beat expectations but still showed a modest decline to a 1-1/2 year low.
Trading ranges remained narrow as Europe returned from the Easter holidays and faced uncertainty over whether European Central Bank policy will move toward more monetary stimulus.
The euro gave up some of its modest gains, but remained positive against the greenback and yen.
U.S. existing home sales slipped by 0.2 percent in March compared to February, but annual unit sales, while the lowest since July 2012, beat forecasts.
European Central Bank President Mario Draghi recently made clear the euro's strength is a possible trigger for the central bank to ease monetary policy. He is scheduled to give a speech in Amsterdam on Thursday.
ECB executive board member Benoit Coeure said on Tuesday there was further margin to reduce the main interest rate below 0.25 percent and that the strength of the euro could be keeping inflation too low.
But until the ECB takes action, possibly at its next meeting on May 8 in Brussels, traders said the euro would stay rangebound.
The euro slipped to a two-week low of $1.3783, a slight loss on the session before rebounding to trade slightly higher at $1.3804.
"For all the talk of unorthodox measures, the euro has been rock solid. It may be constraining the upside, but it is not beating it down either. The euro bears are long exhausted here," said Alan Ruskin, global head of G10 FX strategy at Deutsche Bank.
Investors await Wednesday's euro zone 'flash' PMI surveys while the German IFO institute's monthly reading of business sentiment in Europe's largest economy is due Thursday.
"Euro/dollar is likely to trade with a weaker bias this week given the German IFO and Draghi's speech coming up," said Yujiro Goto, currency analyst at Nomura. "Any downside will be limited though, as investors will await the inflation data due next week."
Very weak inflation in the euro zone, due partly to the strong exchange rate, raises pressure on the ECB to further loosen monetary policy to stimulate growth.
In recent weeks Draghi has brought the currency into focus and warned any further strengthening could lead the euro zone's central bank to use unconventional tools such as asset purchases.
On the other hand, analysts said the dollar was starting to look attractive on the back of improving U.S. data and earnings.
"Better-than-expected company earnings could also encourage renewed inflows into the U.S. stock markets and underpin the dollar," said Citi analyst Valentin Marinov.
The dollar was unchanged at 102.61 yen, after hitting its best level since April 8 of 102.73 yen. (Additional reporting by Anirban Nag in London; Editing by Mark Trevelyan, Tom Brown and Chris Reese)
© Thomson Reuters 2014. All rights reserved
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