Forex: The Dollar retreats as traders await the ECB meeting

© Reuters. – The dollar fell against the yen on Thursday, demand for safe-haven securities was sustained due to trade tensions, as investors await the decision of the European Central Bank later in the day.

The dollar was down 0.2% to 108,21, making the bulk of gains made the night.

Officials in mexico have met Wednesday with their american counterparts during the negotiations in Washington to avoid the u.s. tariff on goods mexican the next week, without however giving immediate signs of a resolution.

In a decision that could strengthen the trade conflict between Washington and its partners, the president of the United States, Donald Trump, has unexpectedly asked Mexico to show more severity in reducing illegal immigration or face a customs duty of 5% on all its exports to the United States.

“The dollar had appreciated against the yen earlier on speculation about the fact that the negotiations on the us-mexican produce positive results, but has, however, declined due to information stating that no agreement had been reached,” said Shinichiro Kadota, a strategist lead at Barclays in Tokyo.

“The focal point of the day will be the ECB and to what extent the president Draghi will be dovish.”

The ECB takes its monetary policy decision later Thursday. The central bank will attempt to give a boost to the struggling euro zone and could even pave the way for more actions later this year, so that an escalation of the trade war world negates the advantages of years of monetary stimulus.

The president of the ECB, Mario Draghi, is expected to maintain its guidance on the possibility of new stimulus measures.

The euro was slightly higher 1,1230 after having declined 0.3% on Wednesday.

The mexican peso, already struggling with issues of trade, has been affected by the ratings after the rating agency Fitch has lowered on Wednesday the rating of its sovereign debt to BBB -, close to the status of junk, while Moody’s has changed the outlook of the country, making it negative against stable previously.

The mexican peso fell to 19,7521 for a dollar, that is closer to the minimum of five months of 19,8800 reached Monday.

The dollar index against a basket of six major currencies, has changed little in 97.243, after a slight increase of 0.25% on the eve, departing from a low of two months of 96.749.

The dollar index plunged to the lowest level in two months, while u.s. yields have fallen sharply this week due to the risk aversion of the investors and the prospects of interest rate reductions by the Federal Reserve.

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