Euro Rallies in Asia after ECB Chief's Comments

The euro rallied in Asia Tuesday after taking a tumble on weak German business data that had boosted speculation of further monetary easing measures by the European Central Bank (ECB).

In afternoon Tokyo trading, the euro rose to $1.3657 and 139.24 yen from $1.3618 and 138.80 yen in Tokyo on Monday. U.S. financial markets were closed Monday for a public holiday. 

In other Asian trading, the dollar changed hands at 101.96 yen, against 101.93 yen.

Gains in the European single currency came as investors look to key U.S. data later in the day for guidance about the state of the world's number one economy.

"The euro found some footing against the dollar after four consecutive days of drops and economic releases today will likely cap dollar strength again as both durable goods orders and consumer confidence could come in below expectation," Credit Agricole said.

On Monday, ECB chief Mario Draghi said the bank was "alert" to the risks of persistently low inflation, amid speculation of further interest rate cuts to avert possible deflation. 

"At present, our expectation is that low inflation will be prolonged but gradually return to close to 2.0 percent," Draghi told a central banking forum organised by the ECB in Sintra, Portugal.

"Our responsibility is nonetheless to be alert to the risks to this scenario that might emerge and prepared for action if they do." he added.

Inflation in the 18 countries that share the euro is currently way below the ECB's 2.0-percent target, picking up only fractionally to 0.7 percent in April. 

Further measures from the ECB would tend to weigh on the euro, but the central bank was likely to hold off launching huge bond-buying measures similar to that unleashed by the U.S. Federal Reserve and Bank of Japan. 

"There was a modest euro-positive response to Draghi's comments even though he made clear that the risk of a ‘pernicious negative spiral’ of low inflation and weak lending risk derailing the eurozone’s fledgling recovery, mandated fresh ECB action," National Australia Bank said.

"An outright bond buying program (Fed/BoJ style QE) still looks to be something the Draghi prefers to avoid...This looks to be why the euro got a slight lift after Draghi spoke."

The single currency had fallen to a three-month low against the dollar last week in response to a soft reading in a German business confidence index.

The dollar was mixed against other Asian currencies, rising to Sg$1.2549 from Sg$1.2537 on Monday, to Tw$30.13 from $30.09 and to 43.73 Philippine pesos from 43.69 pesos.

The greenback also rose to 59.02 Indian rupees from 58.46 rupees but fell to 1,023.60 South Korean won from 1,023.85 won and to 11,578.80 Indonesian rupiah from 11,615.00 rupiah while remaining unchanged at 32.59 Thai baht.

The Australian dollar gained to 92.60 U.S. cents from 92.36 cents while the Chinese yuan was flat at 16.34 yen.