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FOREX-Euro gets the deflation jitters, dollar climbs

* Euro shaky after falling towards $ 1.1800

* Deflationary pressure in euro zone argues for ECB action

* Fed minutes offer no new clues on rate hike timing

By Ian Chua

SYDNEY, Jan 8 (Reuters) – The euro held near a nine-year low early on Thursday, having been in the firing line again as investors wagered the European Central Bank would have to take bolder stimulus steps to combat growing deflationary pressures in the zone.

The euro fell as far as $ 1.1802, putting the 2005 trough of $ 1.1640 in reach of speculative sellers. It has since edged back to $ 1.1835.

The common currency initially dipped against the yen to a fresh two-month low of 140.58. It has since popped back above 141.00 as gains in global stocks dampened demand for the safe-haven Japanese currency.

Data on Wednesday showed consumer prices in the euro zone fell in December from a year earlier, marking the first annual decline since 2009. That only cemented market expectations the ECB will launch a bond buying program at its policy meeting on Jan. 22.

In contrast, the Federal Reserve is still expected to lift interest rates, although the timing remains unclear. Minutes of the December meeting offered no new clues on when the Fed will move.

“The focus now should shift back to the data, with the next few months of releases key in determining whether rate hikes will begin in June as we, along with most FOMC members, expect,” analysts at BNP Paribas wrote in a note to clients.

The dollar climbed back above 119.00 yen, pulling away from a three-week trough of 118.36 plumbed on Tuesday.

Weakness in the euro kept the dollar index aloft at nine-year highs. The index last traded at 92.003, near the peak of 92.265 set overnight.

Also on the menu for bears was sterling, which sank to its lowest in over 17 months after growth in Britain’s dominant services sector slowed last month to its weakest since May 2013.

The pound plumbed as low as $ 1.5055 and last changed hands at $ 1.5112.

Both the Australian and Canadian dollars succumbed to selling pressure as well, but managed to stage a rebound from six-year troughs.

The Aussie traded at $ 0.8076, having earlier slid to $ 0.8033. Its Canadian peer bounced back to C$ 1.1822 per USD from C$ 1.1875.

There is little in the way of market-moving data in Asia, leaving the focus on European data as well as an interest rate decision by the Bank of England.

(Editing by Chris Reese)

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