By Dhara Ranasinghe
LONDON, Nov 26 (Reuters) - The euro slipped back towards
seven-month lows, bond yields fell and European shares gained on
Thursday as talk of aggressive stimulus from the European
Central Bank next week grows.
European shares .FTEU3 rose 0.25 percent in early trade,
while MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS rose 0.5 percent. Japan's benchmark stock index
.N225 also closed 0.5 percent higher.
The euro remained under pressure a day after euro zone
central bank officials told Reuters that they are considering
options such as staggered charges on banks hoarding cash and
buying more debt ahead of next week's ECB meeting.
ID:nL8N13I42U
That fueled talk that the central bank is getting ready for
aggressive measures to lift inflation and economic growth in the
19-member euro zone.
"Ultimately, I think the ECB will be aggressive and that
divergence in policy with the United States must imply a weaker
euro," said Chris Scicluna, head of economic research at Daiwa
Capital Markets in London.
"The question now is how far can we go, and as the Fed
tightens, euro/dollar parity is looking likely by the second
quarter of next year."
The euro fell about 0.2 percent to $1.0609 EUR= , having
tumbled on Wednesday to $1.0565, its lowest level since
mid-April. Against the yen, it was trading 0.2 percent lower at
130 yen, having hit a 7-month low of 129.77 EURJPY=R on
Wednesday.
Overall market activity was expected to be thin due to the
Thanksgiving holiday in the United States.
Speculation about further easing by the ECB comes as upbeat
U.S. economic data reinforces a view that the U.S. Federal
Reserve will soon lift interest rates for the first time in
almost a decade.
Short-term euro zone interest rates fell to record lows on
Thursday as markets interpreted an ECB debate about two-tier
deposit rates as signaling the intention for an aggressive cut.
ECB easing expectations also pushed German five-year
government bond yields DE5YT=TWEB to a new record low of
-0.196 percent, while two-year yields DE2YT=TWEB hovered just
above lows of -0.418 percent.
Expectations for a divergence in monetary policy meanwhile
has pushed the gap between short-dated bond yields in the U.S.
and Germany to their widest since 2006, underpinning the dollar.
The dollar index .DXY , which measures the dollar's value
against a basket of six other major currencies, scaled an
8-1/2-month high of 100.170 overnight. It last stood at 99.863.
The firmer dollar and concerns about surplus supply pushed
crude oil prices lower.
Brent LCOc1 crude oil futures lost 34 cents, or 0.95
percent, to $45.73 a barrel.
U.S. crude's West Texas Intermediate (WTI) futures CLc1
retreated 0.25 percent to $42.94 a barrel after rising to $43.30
during the Asian session. O/R
Spot gold XAU= was little changed at $1,071.65 an ounce,
hovering close to its lowest in nearly six years on the back of
a firmer dollar and expectations for higher U.S. interest rates.
"We are keeping an eye on the dollar as a possible catalyst
(for gold)," ScotiaMocatta analysts said in a note.
(Editing by Dominic Evans)