* Euro stays firm, trades near recent 3-week high
* Near-term focus on ECB policy meeting on Thursday
* Dollar nurses losses after U.S. bond yields slip
* Kiwi bolstered by risk appetite, upbeat RBNZ view
By Masayuki Kitano and Yuzuha Oka
SINGAPORE/TOKYO, Dec 8 The euro edged up and
traded near a three-week high against the dollar on Thursday
ahead of a European Central Bank policy decision, as the
greenback lost momentum from the recent pull-back in U.S. bond
The euro has been the main focus for traders this week after
Italian Prime Minister Matteo Renzi said he would resign after
a stinging defeat in a referendum on constitutional reform.
After initially dropping on the referendum news, the euro
rallied strongly on Monday and has since held below three-week
highs against the dollar as investors wait on the ECB.
The ECB is expected to announce a six-month extension to its
quantitative easing programme on Thursday, while keeping the
size of asset purchases unchanged at 80 billion euros, according
to a majority of economists polled by Reuters.
"Markets are already expecting the ECB to extend its
quantitative easing beyond next March," said Yukio Ishizuki, FX
strategist at Daiwa Securities in Tokyo.
"The euro is less likely to fall, because bets against the
euro have piled up and investors have tended to buy back the
currency after the Italian referendum," Ishizuki added.
The euro edged up 0.2 percent to $1.0776, trading
within sight of Monday's peak of $1.0797, its highest level
since Nov. 15.
On Monday, the euro had initially slumped to $1.0505, its
lowest since March 2015 in a knee-jerk reaction to the outcome
of the Italian referendum.
Emphasising abundant risk, including from forthcoming
elections in Europe, ECB President Mario Draghi is expected to
argue that premature tapering - or slowly ending - bond-buying
could abort a still timid recovery, unravelling the impact of
the purchasing programme.
Moody's changed its outlook on the country's bond rating to
negative from stable, underscoring the financial risks that
heavily indebted Italy faces, saying prospects for much-needed
economic reform had diminished after Italians rejected Renzi's
proposals to revise the constitution and streamline parliament.
While the market remains concerned about the risk of an
early election being called in Italy, the immediate focus was
on the ECB meeting, said Shinichiro Kadota, senior FX strategist
for Barclays in Tokyo.
"I think the market will reassess the situation after seeing
what comes out of the ECB," Kadota said.
The dollar index , which measures the greenback
against a basket of six major currencies, stood at 100.02, back
near a three-week low of 99.85 set on Monday.
The dollar has lost some momentum after U.S. bond yields
declined from their recent peaks. The 10-year Treasury yield now
at 2.345 percent, down from a 1-1/2 year high of
2.492 percent set on Dec. 1.
The dollar fell 0.3 percent to 113.41 yen.
Gains in equities and an improvement in risk appetite helped
lift the New Zealand dollar, bolstered by upbeat comments on the
economic outlook from the Reserve Bank of New Zealand.
The New Zealand dollar rose 0.6 percent to $0.7207.
It touched a high of $0.7223 at one point, its strongest level
in about a month.
There was limited market reaction to Chinese trade data,
which showed that China's November dollar-denominated exports
unexpectedly rose by 0.1 percent from a year earlier while
imports expanded 6.7 percent.
The Australian dollar was up 0.2 percent on the day at
(Reporting by Masayuki Kitano and Yuzuha Oka; Editing by Shri
Navaratnam and Eric Meijer)