* Thursday's ECB meeting in focus
* Sterling weakens after industrial output drop
* Aussie dollar drops after weak GDP data
(Adds market action, changes dateline, previous LONDON)
By Karen Brettell
NEW YORK, Dec 7 The euro gained slightly on the
dollar on Wednesday as investors focused on Thursday's European
Central Bank meeting for possible indications on when the
central bank may begin paring bond purchases under its
quantitative easing program.
The euro has been the main focus for traders this week after
Italian Prime Minister Matteo Renzi's loss in a referendum over
constitutional reform on Sunday.
After initially dropping on the 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 we think is likely to announce an extension of the
QE program beyond March 2017," said Shaun Osborne, chief FX
strategist at Scotiabank in Toronto.
The euro could extend gains if the ECB indicates a time
limit to any QE extension, as investors watch for indications of
Osborne said any further euro strength is likely temporary
as investors focus on higher U.S. growth prospects.
"The broader trends for the market beyond the holiday season
should be dictated by stronger growth and rising interest rates
in the U.S., and that should be positive for the U.S. dollar,"
The Federal Reserve is widely expected to raise interest
rates for the first time this year when its policy-setting
committee meets next week.
The euro was last up 0.25 percent against the dollar,
at $1.0744, after hitting a three-week high of $1.0796 on
The dollar index, which measures the greenback
against a basket of six major currencies, fell 0.12 percent to
100.37, after dropping to 99.849 on Monday, the lowest level
since Nov. 15.
The dollar was flat at 113.96 yen. The yen weakened
earlier on Wednesday after Bank of Japan Deputy Governor Kikuo
Iwata said the central bank had not shifted its focus away from
the pace of money printing.
Sterling fell as much as 0.8 percent to hit a one-week low
of 85.255 pence against the euro after data showed
British industrial output suffered its biggest monthly fall in
more than four years.
The Australian dollar fell as low $0.7411 before
retracing losses after data showed Australia's economy shrank
0.5 percent last quarter, the largest decline since
(Additional reporting by Jemima Kelly in London; Editing by