Euro traders wait for ECB meeting, yuan drops on virus fears

Yuan has lost more than 1% since Monday as virus spreads


LONDON- The euro remained stuck in its recent trading range on Thursday before the European Central Bank's meeting, while China's yuan dropped on fears about the spread of a virus.

Euro/dollar traded little changed at $1.1094. So did the dollar against a basket of currencies.

The ECB introduced a stimulus program in September and data since then have suggested some improvement in the euro zone's economy, so analysts doubt ECB boss Christine Lagarde will announce much on Thursday.

Investors will focus on her answers to questions about the ECB's strategic review, which could see changes to its inflation target.

"The ECB meeting will, in our view, have limited implications for EUR/USD. The two key points in the Bank's message should be, in our view, that data suggests a pick-up in inflation, and the manufacturing cycle has bottomed out," ING analysts said.

The ECB rate decision is due at 1245 GMT. Its press conference starts at 1330 GMT.

Euro/dollar volatility has collapsed in the absence of major monetary policy shifts. Expectations for price swings across FX markets is also at or near record lows.

Elsewhere, the Japanese yen strengthened and China's yuan fell to a two-week low on Thursday as investors grew more anxious about the spread of a virus in China.

Deaths from the flu-like coronavirus stand at 17 and almost 600 people are infected. China has locked down Wuhan, a city of 11 million people, where the outbreak was believed to have originated. 

The moves up in the safe-haven yen and down in the yuan were measured, suggesting investors were not yet panicking about the virus.

The yen rallied 0.2% to 109.59 after earlier reaching 109.49 yen per dollar, its strongest since Jan. 13.

The dollar gained 0.3% versus the offshore Chinese yuan to 6.9351 yuan. The Chinese currency has now lost more than 1% of its value since it touched six-month highs on Monday. The onshore yuan is on course for its worst week since August.

Hao Zhou, an economist at Commerzbank, said the worry was that the virus would hurt China's domestic demand.

"To cope with this risk, monetary policy could illustrate further easing bias. For the FX market, risk-off mode is likely to dominate for the time being," he said.

The Australian dollar gained as much as 0.5% to 0.6879 after data showed unemployment declined to a nine-month low. 

Norway's crown recovered some of its earlier losses to trade at 9.964 crowns per euro after the Norges Bank left interest rates on hold and maintained its outlook for the economy. 

Sterling consolidated around $1.3130 after gaining Wednesday on dwindling expectations the Bank of England would cut interest rates next week.

The euro briefly fell to a near three-year low against the Swiss franc of 1.0729 before recovering to 1.0743. 

The Canadian dollar dropped again, reaching a one-month low of 1.3171 against the U.S. dollar, after the Bank of Canada on Wednesday signalled a future rate cut if a recent slowdown in domestic growth persists. 

(Reporting by Tommy Reggiori Wilkes editing by Larry King) ((

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