Euro Weakens in Asia on ECB Stimulus Expectations

The euro slid in Asia Thursday as falling prices in the eurozone boosted the prospect of European Central Bank (ECB) stimulus, while the Fed appears on track to hike interest rates by mid-year.

The single currency slipped to $1.1820 and 141.51 yen in Tokyo afternoon trade, from $1.1842 and 141.70 yen in New York. The euro dropped to 1.1802 at one point on Wednesday, its lowest since January 2006.

"The inflation data is taking a toll on the euro,” Naohiro Nomoto, an associate for currency trading at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, told Bloomberg News.

"I can’t think of any excuse for the ECB not to act in January," he said.

Speculation of ECB action was spurred by news that eurozone consumer prices fell 0.2 percent in December, marking the first drop since October 2009, at the height of the financial crisis.

The data raise the risk of a spiral of deflation, increasing expectations the ECB will launch a bond-buying program, known as quantitative easing (QE), to prop up the eurozone's beleaguered economy.

Political turmoil in Greece also weighed on sentiment. The debt-hit country is holding elections later this month that could see a victory for a party opposed to austerity measures required under an international bailout.

The dollar -- which rose to 119.79 yen from 119.17 yen -- won support from data Wednesday that showed the U.S. trade deficit shrank to its lowest level in nearly a year while the private sector added a higher-than-expected 241,000 jobs in December.

"I don’t see anything to suggest the U.S. dollar bull market should get bucked,” said Matt Derr, a foreign-exchange strategist at Credit Suisse Group AG.

Minutes of the Federal Reserve's December meeting highlighted risks to the U.S. economy from international developments, but policymakers also appeared willing to look past below-target inflation as they consider hiking interest rates.

"The... minutes from the December meeting did little to change investor views for the timing of the first rate rise in 2015," National Australia Bank said.

The dollar was mostly stronger against other Asia-Pacific currencies.

It rose to Sg$1.3383 from Sg$1.3344 on Wednesday, to 12,719.30 Indonesian rupiah from 12,699.50 rupiah and to 45.05 Philippine pesos from 45.03 pesos.

It also strengthened to Tw$31.99 from Tw$31.97 and to 32.90 Thai baht from 32.87 baht, while it slipped to 63.10 Indian rupees from 63.42 rupees.

The Australian dollar rose to 81.10 U.S. cents from 80.75 cents. The Chinese yuan bought 19.25 yen, up from 19.14 yen.