NEW YORK: The euro lost ground against the dollar Wednesday after three straight sessions of gains amid caution ahead of the European Central Bank's policy meeting.
Most expect the ECB to hold the course on rates Thursday without introducing any special stimulus after some relatively positive data on eurozone growth in recent days.
Most traders seem to have given up speculation from a few weeks ago that the central bank would take action to counter the threat of deflation, with ECB officials saying they don't see a real threat.
"We see no deflation prospects," ECB vice president Vitor Constancio told reporters during a Eurogroup meeting in Athens on Tuesday.
At 2100 GMT, the euro was at $1.3765, compared to $1.3793 late Tuesday.
Most analysts see a drop in inflation in March to 0.5 percent as due to temporary factors and that growth is slowly picking up, meaning that the ECB will likely hold off taking any action this month.
But with growth in the 28-nation bloc at just 0.2 percent in the last quarter of 2013, and producer prices having dipped 0.2 percent on the month, some traders say that could change in the long-term.
"How close to zero do these numbers have to get before the ECB decides to intervene to stimulate the economy?" asked Jasper Lawler of CMC Markets UK.
While the US economy looks stronger, the dollar has not shown strength because the Federal Reserve continues to emphasize that it will not lift its key interest rate off the 0-0.25 percent floor untill possibly the second half of 2015.
"The euro has performed resiliently of late as consensus market views call for no action this week by the ECB," said Western Union senior analyst Joe Manimbo.
"But should the 18-country central bank surprise and lend more support to an economy struggling with dangerously low inflation and near-record unemployment, the euro could quickly weaken below the $1.3704 level that it touched last week."
The dollar also gained on the Japanese yen, rising to 103.85 yen from 103.66, while the euro was virtually flat, at 142.96 yen from 142.98 Tuesday.
The British pound fell slightly to $1.6622 from $1.6628, while the dollar rose to 0.8866 Swiss franc from 0.8833 franc.
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