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Euro gets reprieve

Thursday, August 28 09:23:55

The euro rose further off a one-year low against the dollar on Thursday as feverish speculation of an imminent round of quantitative easing by the European Central Bank cooled.

Sources told Reuters on Wednesday that the ECB was unlikely to take new policy action at its meeting next week unless inflation figures on Friday show the euro zone sinking significantly towards deflation.

That prompted speculators to trim huge bearish positions in the euro. The common currency rose 0.1 percent to $1.3213 , up from Wednesday's low of $1.3151 on trading platform EBS - the euro's weakest since early September 2013.

The euro had been struggling since the weekend after dovish comments from ECB President Mario Draghi, who said the central bank would use "all the available instruments" to ward off the threat of deflation.

Numbers due on Friday are expected to show a fall to 0.3 percent inflation in the euro zone - well into the ECB's "danger zone" of below 1 percent. Traders will be closely watching preliminary German inflation data due later on Thursday to gauge how soft the overall euro zone number might be.

But if Friday's numbers do show the euro zone getting even closer to deflationary territory, that would not necessarily drive the ECB to act, despite Draghi's comments, some said.

The rebound in the common currency knocked the dollar index off a 13-month peak. It last stood at 82.381, down from the high set on Wednesday at 82.727. (Reuters)

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