NEW YORK: The euro held firm on Wednesday in choppy trading as investors awaited an European Central Bank meeting, which they expect will result in interest rates falling deeper into negative territory and more bond purchases to help the euro zone economy.
The Canadian dollar jumped after the Bank of Canada left policy rates unchanged and said its economic outlook was largely the same as January as recent market volatility "appears to be abating."
A rebound in oil and metal prices also rekindled bids for the Canadian dollar and other commodity-sensitive currencies including the Australian and New Zealand dollars.
Still the ECB meeting on Thursday is seen as the marquee event for the currency market this week.
"The market is looking nervously ahead of the ECB meeting," said Greg Anderson, global head of FX strategy at BMO Capital Markets in New York.
The ECB is expected to cut the deposit rate by 10 basis points to -0.40 percent, announce more asset purchases and possibly introduce tiered interest rates like the Bank of Japan in a bid to boost inflation, according to a Reuters poll published on Monday.
More ECB stimulus would put downward pressure on the euro but analysts have said ECB policymakers may not deliver the levels of easing traders expect.
The euro fell to a one-week low against the yen before turning higher. It was last up 0.3 percent at 124.55 yen .
The single currency edged up 0.2 percent at $1.1028, erasing an earlier 0.6 percent fall against the greenback.
The euro's turnaround, together with higher oil and industrial metal prices, erased the dollar's initial gains.
The dollar index, which measures the greenback against the euro, yen and four other currencies, was nearly 0.3 percent weaker at 96.963.
In London, benchmark Brent crude was up 3 percent at $40.93 a barrel and copper futures rose 1.6 percent to $4,948.50 a tonne.
With oil as Canada's biggest export, the loonie hit a 3-1/2-month peak against the dollar, last traded 1.3 percent stronger at C$1.3240.
Elsewhere in the dollar bloc, the Kiwi was up 0.9 percent at $0.6803 ahead of a New Zealand central bank meeting on Thursday. While markets imply a small chance of a rate cut, investors suspect it is only a matter of time before the central bank delivers another cut to the 2.5 percent cash rate.
The Aussie dollar was up 1.1 percent at $0.7522 after reaching an eight-month high versus the greenback.
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