Euro flat in Asia after drop on ECB easing plan reports

TOKYO- The euro held steady in Asia on Wednesday after it dropped in New York on reports that the European Central Bank could expand its bond-buying programme.

In Tokyo morning trade, the common currency fetched $1.2720 and 136.01 yen against $1.2714 and 136.04 yen in New York late Tuesday. The single currency had been at $1.2800 and 136.86 yen the previous day.

The dollar was little changed at 106.90 yen against 106.99 yen, despite fresh data that showed US existing-home sales rebounded in September from a dip in August to their highest pace of the year. The greenback was, however, up from 106.56 yen in Asia Tuesday.

Investors will be looking to US inflation figures later in the day after a series of uneven data has thrown into question the strength of the world’s top economy, ahead of the US Federal Reserve’s policy meeting next week.

“The US CPI (consumer price index) is at the forefront of attention,” Ayako Sera, head of research team at Sumitomo Mitsui Trust Bank, told Dow Jones Newswires.

Late Tuesday, reports that the European Central Bank was considering buying riskier corporate bonds on the secondary market, perhaps as early as next year, pushed down the euro against the dollar and the yen.

If followed through early next year as some reports suggest, the ECB move could further push down long-term interest rates in the eurozone, which would tend to weaken the currency by denting demand for euro-denominated assets.

“The slippage in the euro-dollar rate was exacerbated by comments from German Finance Minister Wolfgang Schaeuble that a lower euro exchange rate helps the (German) economy,” National Australia Bank said in a note.

On Wednesday, traders largely shrugged off Japan’s trade balance data, which showed the worst-ever September deficit of 958.3 billion yen ($8.96 billion), putting the world’s number-three economy on track for a record annual shortfall.

The monthly result, which was much worse than the market median forecast for a deficit of 768 billion yen, comes on the back of a string of weak figures and a sharp economic contraction in the second-quarter that have stoked speculation the Bank of Japan will expand its monetary easing plan and weaken the yen.