* Euro weaker as investors position for dovish ECB
* Euro hits one-week low vs yen
* BOC, RBNZ policy reviews loom
(Recasts, updates prices)
By Anirban Nag
LONDON, March 9 (Reuters) - The euro fell to a one-week low
against the yen and dropped below $1.10 on Wednesday, before a
meeting of the European Central Bank, which is expected to take
interest rates deeper into negative territory and ease monetary
policy yet more.
The ECB is expected to cut the deposit rate by 10 basis
points to -0.40 percent, announce more asset purchases and
possibly introduce tiered interest rates like the Bank of Japan
in a bid to boost inflation. ID:nL3N15Q1VT ID:nL5N16G2VC
The euro was down 0.7 percent at 123.08 yen EURJPY= and
0.4 percent lower against the dollar at $1.0963 EUR= , inching
back towards a one-month low of $1.08255 struck on March 2.
Those positioning for more losses in the euro are, however,
wary about placing significant bets against it after being
burned in December, when the ECB eased policy less than
expected, leading the euro to rise 4 percent against the dollar.
"Given expectations are so high that the ECB will ease
policy, there is a chance that it could fall short and we could
see a bounce in the euro," said Niels Christensen, FX strategist
at Nordea.
With a 10 basis points cut almost factored in, investors who
are betting against the euro are hoping for a bigger rate cut to
take the euro lower to around $1.08.
"The market is not heavily positioned and has been caught
the wrong way a couple of times recently," said John Hardy, head
of currency strategy at Saxo, adding investors were uncertain on
how to react to policy signals after the December meeting.
The yen, meanwhile, extended gains, cementing its role as a
winner so far this week after China's exports tumbled by the
most in more than six years last month. The soft China data
highlighted risks facing the global economy, bolstering
expectations for dovish outcomes at central bank policy reviews
in Europe, Canada and New Zealand.
The New Zealand dollar traded higher as stock markets
recovered in Europe. It was last trading at $0.6780 NZD=D4 ,
off Friday's peak of $0.6820. While markets imply a small chance
of a rate cut by the Reserve Bank of New Zealand on Thursday,
investors suspect it is only a matter of time before it delivers
another cut to the 2.5 percent cash rate.
In contrast, the Bank of Canada is expected to keep rates on
hold on Wednesday. The Canadian dollar was slightly higher on
the day, trading at C$1.3385 per USD CAD=D4 , having struck a
3-1/2-month peak of C$1.3262 set on Monday. BOCWATCH