The dollar kept marching higher on Thursday in anticipation of a strong U.S. payrolls report, while the euro dangled just above a two-year trough with investors waiting to see how European Central Bank chief Mario Draghi deals with dissent.
The euro last traded at $1.2484, having fallen nearly a full U.S. cent from Tuesday’s high of $1.2577. It was flirting once again with a two-year low of $1.2439 set early in the week.
Disappointing surveys of euro zone business growth and a surprise decision by the Bank of Japan last week to enhance its already massive monetary stimulus have added pressure on the ECB to ease more.
“Whether the euro can stay in the premises of $1.25 depends on how much the ECB spices up its policy today. If the tweaks clearly point to future quantitative easing, the euro’s trading range could shift down towards $1.20,” said Koji Fukaya, president at FPG Securities in Tokyo.
The ECB’s policy meeting later Thursday has been given extra significance by reports some members were unhappy with Draghi’s aggressive stimulus push.
“Our base-case scenario is that ECB stops short of introducing broad-based QE at this meeting, but that President Draghi sends a clear signal that the Governing Council is committed to expanding the ECB’s balance sheet,” analysts at BNP Paribas wrote in a note to clients.
“The balance sheet goal will be difficult to achieve unless the ECB broadens the scope of its asset purchase program to sovereign bonds, and our European economists continue to expect a policy move in December.”
Soft data out of Europe again contrasted with more upbeat news from the United States, where private employers added 230,000 jobs in October, marking a record seven straight months of job gains exceeding 200,000.
The upbeat U.S. data fanned expectations of a strong reading in Friday’s closely watched nonfarm payrolls report.
Dollar bulls were also heartened by the outcome of midterm elections that gave Republicans control of both houses of Congress for the first time since 2006, although whether this would lead to any significant policy changes in the near term remained unclear.
The greenback was up 0.6 percent at 115.37 yen after storming above the 115 threshold for the first time in seven years. Even the euro climbed to 144.065 yen, a high last seen in January.
Investors remain keen to sell the yen after BOJ Governor Haruhiko Kuroda said the central bank was ready to do even more to hit its 2 percent inflation goal and recharge a tottering economy after the central bank’s shock easing last Friday.
Currencies of commodity-producing countries continued retreating as global growth concerns dampened demand for exports such as crude oil and iron ore.
The Australian dollar fell to a four-year low of $0.8553 against the U.S. dollar, with a solid domestic jobs report doing little to arrest the slide.
Iron ore, Australia’s major export, fell to a five-year low amid cooling demand from key importer China.
The Norwegian crown, a noticeable underperformer overnight, has also retreated steadily along with a decline in the price of crude oil – Norway’s main export.
The euro fetched 8.535 crowns after rising to as much as 8.679 overnight, highest since late 2009.
Brent crude oil dropped to four-year lows this week.