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USA 'weak dollar' remarks raise policy question, says European Central Bank chief Mario Draghi

28 January 2018

The European Central Bank kept its ultra-easy policy firmly on hold on Thursday but ECB chief Mario Draghi will now face the hard task of addressing the euro's potentially damaging surge against the dollar.

Mnuchin said Wednesday that "obviously a weaker dollar is good for us as it relates to trade and opportunities".

Still, many market players expect the BOJ to wait several months, and possibly many more, before tightening its policy, given the country's inflation is nowhere near its two-percent target.

Draghi said Thursday that recently volatility in the euro's exchange rate was "a source of uncertainty" that merited "monitoring".

In December, the European Central Bank raised the eurozone's GDP growth outlook for 2017 to 2.4 percent from 2.2 percent, for 2018 to 2.3 percent from 1.8 percent.

The euro's ascent to a three-year high against the dollar may yet become a thorn in the economy's side if it curbs exports and damps prices.

Although he did not mention Mr Mnuchin by name, Mr Draghi suggested at an ECB press conference that "several members" of the bank's governing council had "expressed concern. that was broader than the exchange rate, about the status of global relations right now".

New Zealand's quarterly inflation data for the fourth quarter of 2017 showed that consumer prices rose less than expected at a pace of 0.1%.

Hungarian government bond yields, after jitters due to a disappointing central bank interest rate swap tender a week ago, dropped 3-4 basis points from Wednesday's fixing.

Policy makers reiterated that they'll continue buying 30 billion euros ($37 billion) of assets a month until at least the end of September.

The German share price index, DAX board, is seen at the stock exchange in Frankfurt, Germany, January 24, 2018. It also kept its policy sequencing unchanged, namely that interest rates are likely to stay at "present levels for an extended period of time and well past the horizon of the net asset purchases". "We look at inflation, that is our main concern".

Drinks maker Diageo dipped 0.2 per cent after saying it expected foreign exchange swings to take a bigger than expected bite out of sales and profits.

He said several European Central Bank policymakers at a meeting on Thursday had questioned a change in US policy.

Britain, undergoing its own tricky negotiations as it tries to untangle itself from the European Union, is facing the opposite problem to the currency bloc with a weaker sterling since the Brexit vote driving nflation well above the Bank of England's target of 2 percent.

The ECB has bought nearly 2.3-trillion euros (R34-trillion) of government and corporate bonds, offered cheap loans to banks and set interest rates at historic lows, aiming to stoke eurozone growth and boost inflation towards its target of just below 2 percent.

USA 'weak dollar' remarks raise policy question, says European Central Bank chief Mario Draghi