Dollar gains against euro after ECB as focus turns to Fed

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The euro reversed to trade lower against the dollar on Thursday after traders looked past a European Central Bank meeting and weighed the potential for a more hawkish Federal Reserve next week, while the yen rebounded on flagging risk appetite.

The euro was last down 0.07 percent against the dollar at $1.1296, near a session low of $1.1271, after hitting a nine-day high of $1.1394 on the back of comments from ECB President Mario Draghi.

Draghi brushed off German criticism of his ultra-loose monetary policy and vowed to use all the tools at his disposal for "as long as needed."

Analysts said his remarks did not suggest the bank would weaken the euro with further stimulus measures any time soon, which led the euro to initially rally. As the focus shifted to the Fed's April 26-27 meeting, however, the dollar recovered.

Commodity currencies in focus

"There's a risk that the Fed could signal a stronger chance of a June rate rise than markets currently expect," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.

Fed funds futures contracts on Thursday suggested traders were pricing in just a 21 percent chance of a Fed interest rate hike in June, according to CME Group's FedWatch program. Fed rate increases are expected to boost the dollar by driving investment flows into the United States.

The dollar slipped against the safe-haven yen for the first session in four as a surge in risk appetite stalled. U.S. stocks, which flirted with record high levels on Wednesday, were slightly lower on Thursday, while oil prices fell.

The dollar was last down 0.29 percent against the at 109.5210 yen, easing from a more than two-week high of 109.89 yen hit earlier in the session.

Deputy Japanese Prime Minister and Minister of Finance Taro Aso (R) poses for photographers with U.S. Secretary of the Treasury Jack Lew (L) prior to their meeting at the IMF Headquarters April 16, 2015 in Washington, DC.
Japan conveys 'deep concern' over yen rises to US

"If equities fall, it appears that the yen is going to strengthen," said Axel Merk, president and chief investment officer of Palo Alto, California-based Merk Investments.

The dollar index, which measures the greenback against a basket of six other major currencies, was last up 0.14 percent at 94.62. The dollar was last up 0.25 percent against the Swiss franc at 0.9737 franc, near a session high of 0.9745 franc.