* Euro hit hard across the board
* ECB pondered rate cut, sees economy shrinking next year
* U.S. jobs data next event risk
By Ian Chua
SYDNEY, Dec 7 The euro languished at one-week
lows against the greenback on Friday, having suffered a major
setback after the European Central Bank painted a bleak outlook
for the euro zone and discussed cutting interest rates.
The single currency fell nearly 1 percent to $1.2950,
posting its biggest one-day loss in a month and retreating from
a seven-week peak of $1.3127 set mid-week.
"The main trigger for the sharply negative euro reaction was
the mention of a 'wide' discussion over rate cuts, while Mr.
Draghi also said the ECB was 'operationally ready' for negative
rates," said BNP Paribas strategist Vassili Serebriakov.
ECB President Mario Draghi said policy makers talked about
cutting its main 0.75 percent policy rate before opting to leave
it on hold, even as it slashed forecasts for growth. It also
touched on the idea of cutting its deposit rate into negative
The euro was last at $1.2967, with immediate support seen
around $1.2949, a level representing the 38.2 percent
retracement of its Nov 13-Dec 5 rally.
Against the yen, the euro was also nearly 1 percent lower at
106.81. It suffered losses of more than 1 percent
versus the Australian and New Zealand currencies.
The slid in the euro helped push the dollar index up
0.6 percent to 80.237, rebounding from a six-week trough plumbed
Traders said any follow-through euro selling in Asia may be
limited ahead of U.S. non-farm payrolls report due 1330 GMT.
Analysts polled by Reuters expect a sharp slowdown in employment
growth due to the disruption caused by superstorm Sandy.
"We may see the reserve currency consolidate over the next
24-hours of trading as job growth in the world's largest economy
is expected to expand at a slower pace," said David Song,
currency analyst at DailyFX.
Any weakness in the closely watched report would also
reinforce expectations that the Federal Reserve will announce a
new round of Treasury bond purchases to replace its expiring
Operation Twist programme at next week's meeting.
Such action could keep investors from getting too
enthusiastic about the greenback.
Meanwhile, the Australian dollar showed little sign of
backing down after a surprisingly firm employment report on
Thursday prompted markets to trim chances of an interest rate
cut at the Reserve Bank of Australia's next meeting in February.
The Aussie reached $1.0515, a high not seen since
September, before profit-taking took it down a notch to $1.0478.
It's resilience is remarkable given this week's interest rate
cut and a slew of data pointing to a less rosy outlook for the
Trade data due at 0030 GMT will probably support the view of
slower growth, with analysts expecting a wider trade deficit of
A$2.05 billion in October.