RTRS: FOREX-Yen, dollar drop as risk appetite improves, ECB eyed
The yen and dollar fell on Thursday, losing ground to higher-yielding currencies as stock markets rose on hopes a deep recession is moderating.
Asian stocks surged on Thursday, with Tokyo's Nikkei average .N225 rallying more than 4 percent, after U.S. factory and home sales data released the previous day spurred optimism about the economy, even though other numbers showed job losses mounting. [ID:nN01407201]
"Market participants are becoming more convinced of a global recovery and that is causing risk appetite to increase," said Toru Umemoto, chief FX strategist Japan at Barclays Capital.
But ranges were tight as the currency market awaited a European Central Bank policy decision later in the day.
The market expects the ECB to cut interest rates to a record low of 1 percent, and the focus was on what the central bank might say on unconventional easing.
Participants are keen to see if the ECB will follow the U.S., British, and Japanese central banks in buying corporate or government debt to boost money supply in a policy known as quantitative easing, though many doubt it is ready take that step. [ID:nL115284]
The decision is due at 1145 GMT and ECB President Jean-Claude Trichet will answer questions at 1230 GMT. [ECB/INT]
"If Trichet mentions any untraditional measures this could be a negative surprise for the euro," Umemoto said.
The dollar plunged in March when the Federal Reserve announced it would buy large amounts of government debt, with investors fearing this would flood the market with dollars.
Alan Ruskin, a strategist at RBS, wrote in a research note it was possible Trichet would duck questions on quantitative easing but any sign of commitment to such a step would hit the euro.
"At a minimum, it should result in a full unwind of the U.S. QE led euro/dollar spike and a move back down to $1.3000, taking out the recent 1.3110 low," Ruskin wrote.
The euro edged up 0.1 percent to $1.3267 , although it was still within sight of Monday's two-week low near $1.3100 and chart support at its 100-day moving average of $1.3137.
