SYDNEY: The euro remained on the defensive early on Thursday, having made an about-face as investors adjusted positions in the lead up to a policy meeting by the European Central Bank.
The ECB is widely expected to hold interest rates unchanged at record lows, but President Mario Draghi is likely to drive home the case for ultra-loose monetary policy.
"The task now for the ECB lies more along the lines of promoting the effectiveness of these new expansionary policies and assertion that the Bank can do more if needed," said Rodrigo Catril, FX strategist at National Australia Bank.
Last month, while the ECB delivered aggressive easing measures, the euro perversely rallied after Draghi said there was probably no need for more rate cuts if the latest stimulus worked.
The euro stood at $1.1303, versus around $1.1358 this time on Wednesday and was well off the overnight peak of $1.1388.
Against the yen, it shuffled sideways and was last little changed just above 124.00.
With three major central bank meetings looming, traders said there is a lack of market conviction.
The Federal Reserve holds its policy review on April 26-27, while the Bank of Japan has its meeting on April 28.
It is clear that Japanese officials are unhappy with the strength of the yen and there is some talk the BOJ could ease further.
For the Fed, no action is expected but traders said it will need to firm the tone of its statement if it wanted to prepare markets for a June rate hike.
Fed Chair Janet Yellen has repeatedly said the Fed will be cautious in tightening policy, prompting markets to barely price in a rate hike this year.
US Treasury yields have fallen as a result, though they hit three-week highs on Wednesday as oil and stocks gained. The higher US yields saw the greenback come within a whisker of 110.00 yen, off this week's trough of 107.75.
With the euro on the back foot, the dollar index reversed all of Tuesday's fall and was again flirting with 94.600, off a low of 93.926 set earlier in the week.
As a result, the rally in commodity currencies came to a halt.
The Aussie dipped back below 78 US cents, from a 10-month peak of $0.7830.
Its kiwi peer slipped below 70 US cents, having been as high as $0.7055.
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