Euro struggles in Asia on ECB chief comments

SINGAPORE (AFP) - The euro struggled to recover in Asian trade Monday after being hammered at the end of last week in response to comments from the European Central Bank (ECB) chief hinting at further stimulus measures to fend off deflation.

The single currency was at 145.86 yen by midday, compared with 145.91 yen in late London trade Friday and well off the 147.81 yen in Asia earlier that day.

It also tumbled to US$1.2387 from US$1.2405 in London and is sharply down from US$1.2553 Friday in Tokyo. The US dollar bought 117.74 yen against 117.63 yen late Friday.

"Inflation remains the key variable for the euro," banking group ANZ said in a note, adding that "there is little expectation in a change to deflationary pressures that will cap the topside" of the currency.

ECB head Mario Draghi on Friday said at a banking congress that the central bank "will use all means available to us, within our mandate, to return inflation towards our objective - and without any undue delay".

Among the measures being considered are the large-scale purchase of government bonds - known as quantitative easing - similar to that undertaken by the Bank of Japan and recently wound down by the US Federal Reserve.

His comments came as the ECB struggles to fight off deflation in the currency block, with inflation currently at just 0.4 per cent, well below the bank's target of 2.0 percent.

Singapore's United Overseas Bank (UOB) said it expects the euro to further weaken.

"The unexpected sharp drop last Friday indicates that a temporary top is in place... The immediate pressure is on the downside and the current weakness could extend towards the strong support at 1.2290 before a rebound can be expected," it said.

ANZ also said the recession in Japan and Prime Minister Shinzo Abe's call for a snap election would keep the yen under pressure, having already fallen to a more than seven-year low against the dollar.