TOKYO (AFX-ASIA) - The euro was little changed in midafternoon trade, with investors reluctant to take fresh positions ahead of a rate decision by the European Central Bank later today, dealers said. Dealers added that the majority of market participants are currently expecting the ECB to decide to hold its rate unchanged at its board meeting later today.
"There are still inflation concerns remaining in the euro zone," according to ABN Amro Bank forex dealer Shuji Takano, citing recent euro-zone HICP (harmonised index of consumer prices) data.
According to Eurostat, euro-zone HICP in March was up 2.6 pct year-on-year, compared with the ECB.s inflation target of 2.0 pct. "I don't think HICP will within this month to the ECB's target," Takano said.
"If you consider the ECB (to be seeking to keep inflation down), it is unlikely that the ECB will decide to cut its rate within this month," he added.
He said the overall trend of the euro may weaken against that of the dollar with euro rates expected to be kept unchanged. "The economic outlook of the euro-zone is not brighter than that of the U.S. As long as the ECB does not decide to cut its rate, the economic outlook in the euro-zone will not improve," he said. Takano said he expects euro/dollar to move in the range of 0.9000-0.8700 next week.
The dollar was rangebound against the yen, with no fresh leads on the market, after the easing of yen-buying on structural reform leads following Prime Minister Jyunichiro Koizumi's taking power, dealers said.
"If we consider the recent downturn of the local equity market, structural reform hopes (after Koizumi's took office) have rapidly eased," Takano said.
He added that he expects the yen not to fall sharply against the dollar even if the local equity market falls further.
"However, I think the dollar will gradually rise against the yen if the local equity market continues to fall," he said, adding that dollar/yen is seen trading in a range of 121.00-124.00 next week.