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FOREX -Euro braces for ECB moves, rate cut jolts Canadian dlr

* ECB next major focus; QE details crucial to outlook for euro

* CAD nurses losses in wake of surprise BOC rate cut

* Other dollar bloc peers also under pressure (Updates prices, adds comments)

By Ian Chua and Masayuki Kitano

SYDNEY/SINGAPORE, Jan 22 (Reuters) – The euro held steady on Thursday as investors awaited details of a sovereign bond-buying programme that the European Central Bank is seen likely to announce later in the day.

Market expectations are sky-high for the ECB to unveil a large-scale programme of quantitative easing.

A euro zone source said on Wednesday the ECB’s Executive Board has proposed a programme that would enable the bank to buy 50 billion euros ($ 58.05 billion) in bonds per month starting in March.

Whatever the outcome, traders said there is sure to be plenty of volatility in euro/dollar.

The euro last traded near $ 1.1607, little changed on the day.

“And given extreme levels of positioning as revealed both anecdotally and in IMM data, we prefer to watch this from the sidelines,” said Nick Parsons, global co-head of FX strategy at National Australia Bank.

“We’ve exited our short position, established at 1.2435, at 1.1555.”

Since reaching an 11-year trough of $ 1.14595 on Friday, the common currency has been drifting in a slim range as investors wait to see how aggressive the central bank might be.

Market players are expecting the ECB to use a bond-buying programme until its balance sheet increases by roughly 1 trillion euros from current levels, to 3 trillion euros, said Masafumi Yamamoto, market strategist for Praevidentia Strategy in Tokyo.

“But it is unclear whether (an expansion to) 3 trillion euros would be the end of it,” Yamamoto said, adding that a further balance sheet expansion could not be ruled out over the longer term, depending on how economic conditions evolve over the next year or so.

The ECB is aiming to bring its balance sheet close to levels last seen in early 2012 — when it briefly topped 3 trillion euros — to spur lending to business and bolster the economy.


The Canadian dollar languished near its lowest level in nearly six years, having suffered a massive drop on Wednesday after the Bank of Canada stunned markets by cutting interest rates.

The BOC lowered its overnight rate to 0.75 percent from 1 percent, citing a threat to economic growth and its inflation targets from the dramatic drop in oil prices.

The Canadian dollar last stood at C$ 1.2359 versus the U.S. dollar, not very far from Wednesday’s low of C$ 1.2420, the Canadian dollar’s weakest level since April 2009.

The BOC was the latest central bank to wrong foot markets, following the Swiss National Bank’s decision last week to suddenly abandon its three-year-old currency cap.

Other dollar bloc currencies also came under pressure after the Bank of Canada’s surprise rate cut, and investors speculated Australia’s central bank might also cut soon, not least to keep the Aussie dollar from strengthening.

The Australian dollar fell 0.3 percent to $ 0.8056, hovering near a five-year trough of $ 0.8033 set earlier in the month. The New Zealand dollar touched a low of $ 0.7516 on Thursday as of 0436 GMT, its lowest level in over two years.

Elsewhere, the U.S. dollar edged up 0.2 percent versus the yen to about 118.22 yen, regaining some footing in the wake of its 0.7 percent drop the previous day.

The dollar had slipped versus the yen on Wednesday after the Bank of Japan stood pat on monetary policy, prompting speculators who had anticipated more easing to cover their short positions in the yen.

(Editing by Simon Cameron-Moore)

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