The euro was trading just above a three-month low against the dollar on Thursday, with the focus on whether European Central Bank President Mario Draghi will indicate that the bank is poised to taper its bond purchase programme. The euro was flat at $1.0976, having fallen to a three-month low of $1.0952 early in the London session. A drop below that mark, struck on July 25, would take the euro to its lowest point since the Brexit referendum results on June 24.
As expected, the ECB held interest rates steady and did not make any changes to its asset purchase programme. But investors want more clarity from Draghi about recent speculation that the bank could start tapering down its bond purchases. Draghi starts his press conference at 1230 GMT. Any indications that the governing council discussed tapering could see front-end yields on euro zone government bonds edge up, lifting the euro with it. There is also a chance Draghi may sound dovish too, with the ECB having downgraded growth forecasts only last month.
"I will not be surprised to see some bounce later on," said Niels Christensen, a currency strategist at Nordea. He expects Draghi to reiterate his commitment to looser monetary policy and quash talk of any tapering of the asset purchase programme. Analysts at HSBC said even if the ECB entertains the idea of a taper no matter how far into the future, it would help the euro. All of which meant a potentially choppy session was in store for the single currency.
Meanwhile, there was renewed bid for the dollar after the third and final debate in the US election campaign between Democrat Hillary Clinton and Republican Donald Trump. It was up 0.2 percent against the yen at 103.63 yen and against a basket of currencies it was at 97.906, not far from a recent 7-month high. Since most recent polls have favoured Clinton, the market's focus had been on whether Trump would be able to use the debate to regain momentum in the final weeks before the November 8 vote.
"There didn't seem to be anything in the latest debate that put Clinton in a tight spot," said Kota Hirayama, senior economist for SMBC Nikko Securities in Tokyo. A CNN snap poll of debate watchers found Clinton won with 52 percent, and Trump trailed with 39 percent, the network said. The Mexican peso, which is closely watched because Mexico is seen as most vulnerable to Trump's economic policy proposals, rose to 18.4555 to the dollar at one point, its highest level since September 8. It was last trading 0.2 percent lower.
The dollar was also helped by bullish comments from one of the most influential officials on the Federal Reserve. New York Fed President William Dudley said the Fed will likely raise interest rates later this year if the economy remains on track. Dudley, a permanent voter on policy and a close ally of Fed Chair Janet Yellen, said a quarter-point hike this year "is not really that big a deal" given the economy is "reasonably close" to the Fed's goals of 2 percent inflation and maximum sustainable employment.
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