By Peter Nurse
Investing.com - The dollar weakened in early European trading Thursday, remaining near to multi-week lows, with the euro in focus as the European Central Bank meets.
At 2:55 AM ET (0755 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was 0.1% lower at 91.013, just above the seven-week low of 90.856 seen on Tuesday.
USD/JPY was down 0.2% at 107.84, GBP/USD rose 0.1% to 1.3940, the risk-sensitive AUD/USD rose 0.1% to 0.7755, while EUR/USD traded 0.1% higher at 1.2043, after touching a seven-week high of 1.2079 earlier in the week.
Investors have also turned away from the greenback as U.S. Treasury yields reversed their climbs in March 2021, and an auction of 20-year Treasuries drew strong demand on Wednesday, which also helped to cap yields.
The benchmark 10-year Treasury yield was last seen around 1.53%, around the lowest it has been since mid-March, a sharp move lower from the 14-month high at 1.7760% reached at the end of last month.
Still, most attention Thursday will be on the European Central Bank, as it hands down its latest policy decision later in the day. The central bank is widely expected to maintain its current policy, but any positive comments from the central bank about the economic outlook or hints of tapering bond purchases are widely expected to boost the euro, especially after it said at its last meeting that it would step up net asset purchases to curtail the rise in bond yields.
“With the euro below its multi-quarter average and the European Central Bank already announcing front-loaded purchases in March, the April ECB meeting should have a muted impact on the single currency,” said analysts at ING, in a note. “Instead, the focus will be on improving eurozone data in coming months, and with EUR/USD still trading cheap, further upside lies ahead.”
Elsewhere, USD/CAD fell 0.1% at 1.2480, continuing Wednesday’s selloff after the Bank of Canada tapered the pace of weekly bond buying to C$3 billion per week from C$4 billion, becoming the first G-10 central bank to rein in its bond buying program.
"The outlook has improved for both the global and Canadian economies. Activity has proven more resilient than expected in the face of the COVID-19 pandemic, and the rollout of vaccines is progressing," the BoC said in a statement.
USD/TRY rose 1.5% to 8.3075, with the lira continuing to weaken amid questions of the extent of foreign-currency reserves the central bank used in an attempt to prop up the domestic currency over the last couple of years, a period when President Recep Tayyip Erdogan’s son-in-law Berat Albayrak was treasury and finance minister.
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