The euro hovered near a four-month high and a key resistance area against the dollar on Thursday, supported by expectations that the European Central Bank is set to pave the way for rate rises later in the year. The ECB left interest rates on hold as expected at its monthly policy announcement, with attention centred on ECB President Jean-Claude Trichet’s press conference at 1330 GMT. The euro was flat against the dollar at $1.3858, hovering near a four-month peak of $1.3890 hit on trading platform EBS on Wednesday. It triggered short-term downside stop-losses through $1.3840 in the European morning but traders said persistent Middle East demand kept the currency well cushioned. Strong demand was expected on approach to $1.3800. It was within sight of the 76.4 percent retracement of its fall from November to January at $1.3947, as well as its 200-week moving average at $1.3959. The euro has traded below the 200-week average since mid-November. Options traders reported Asian offers ahead of $1.3900 option barriers, with more significant option structures highlighted at $1.3950, said to be expiring March 10. The dollar index was steady on the day at 76.722, near a four-month low of 76.529 hit on Wednesday. Trendline support connecting its record trough and its 2010 low lies in the 76.15-25 area. The US currency also hit a one-month low of 81.57 yen on Wednesday, though thick bids around 81.50 yen were likely to limit further losses in the near term.
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