CURRENCIES: Euro Dips As ECB Leaves Interest Rates Unchanged

By Joseph Adinolfi and Victor Reklaitis, MarketWatch Features Dow Jones Newswires

Mexican peso, Canadian loonie advance as White House says it will stay in Nafta

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The euro briefly dipped on Thursday after the European Central Bank left interest rates unchanged and made no adjustments to its monetary guidance.

The euro changed hands at $1.0885, compared with $1.0905 late Wednesday in New York, as the central bank reiterated that it could increase the size or lengthen the duration (http://www.marketwatch.com/story/ecb-leaves-rates-unchanged-reiterates-asset-purchase-plans-2017-04-27) of its asset-buying program if inflation looks set to fall far back below its target of near, but just below, 2%.

This guidance disappointed some traders who had bet that it might signal that interest rates could soon rise, despite the central bank's warnings to the contrary.

ECB President Mario Draghi has insisted that the central bank's decision to lower the amount of its monthly asset purchases to EUR60 billion ($65.4 billion) from EUR80 billion ($87.2 billion) didn't constitute tapering, and that policy will likely remain accommodative for the foreseeable future.

But signs of improving economic growth and inflation have inspired speculation that a policy shift could be imminent. Last week, a preliminary reading of the eurozone composite purchasing managers index, an important indicator of economic health, estimated that growth had improved in April at its fastest pace in six years.

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"No new drama in today's ECB announcement. The French election has them on a tight leash," said Naeem Aslam, speculating that the central bank wouldn't risk rocking the boat ahead of the May 7 runoff vote between far-right euroskeptic Marine Le Pen and her centrist rival, Emmanuel Macron.

In other currency trading, the Mexican peso and Canadian dollar advanced against the greenback after President Donald Trump pledged during a phone call with the Mexican and Canadian presidents late Wednesday to keep the U.S. in the North American Free Trade Agreement (http://www.marketwatch.com/story/trump-backs-off-threats-promises-us-will-stay-in-nafta-2017-04-26). That contradicted reports that he was weighing whether to pull out of the 23-year-old trade pact with Canada and Mexico, which had sent both the peso and the loonie spiraling lower.

One dollar bought 19 pesos, down from 19.18 pesos late Wednesday in New York, while the buck traded at C$1.3592, down from C$1.3621 late Wednesday.

In other trading, one dollar bought Yen111.44, up from Yen111.06 late Wednesday, after the Bank of Japan left its ultraeasy monetary policy unchanged (http://www.marketwatch.com/story/bank-of-japan-leaves-rates-unchanged-says-inflation-is-lagging-2017-04-26). However, the bank did offer a more upbeat assessment of economic growth, though it did note that inflation continued to lag the bank's target.

The pound was changing hands at $1.2893, up from $1.2850 late Wednesday.

The ICE U.S. Dollar Index , a measure of the greenback's strength against a basket of six rivals, rose marginally to 99.07.

--Barbara Kollmeyer contributed to this article

(END) Dow Jones Newswires

April 27, 2017 08:34 ET (12:34 GMT)