* Euro clings to previous day's gains, eyes on ECB
* Dollar nurses losses after U.S. bond yields slip
* Euro back within sight of Monday's near 3-week high
By Masayuki Kitano
SINGAPORE, Dec 8 The euro held firm near a
three-week high versus the dollar on Thursday, as investors
turned their attention to the European Central Bank's policy
meeting later in the day, and as the greenback was dragged down
by a drop in U.S. bond yields.
The euro has been the main focus for traders this week after
Italian Prime Minister Matteo Renzi said he will resign after
suffering a stinging defeat in a referendum on constitutional
After initially dropping on the weekend 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.
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 euro edged up 0.2 percent to $1.0769 after
gaining 0.3 percent on Wednesday. It was 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.
It then quickly rebounded as a worst-case political scenario
for Rome appeared to have been averted for the time being.
After Renzi's resignation, most parliamentary factions
pushed for an early election in a few months' time.
While the market remains concerned about the risk of an
early election being called in Italy, the focus at the minute
was on the ECB meeting, said Shinichiro Kadota, senior FX
strategist for Barclays in Tokyo.
"The market is concerned about that risk," Kadota said,
referring to the possibility of an early election.
"I think the market will reassess the situation after seeing
what comes out of the ECB," he added.
The dollar index, which measures the greenback against a
basket of six major currencies, stood at 100.09 ,
down from Wednesday's intraday high of 100.60.
On Wednesday, the dollar index had slipped by about 0.2
percent as U.S. bond yields slipped back.
The dollar eased 0.1 percent versus the yen to 113.62
There was limited reaction to a downward revision to Japan's
July-September gross domestic product (GDP) data, which showed
lower than expected growth of 0.3 percent quarter-on-quarter,
compared to market expectations for 0.6 percent growth.
In late November, the dollar index had set a 13-1/2 year
high of 102.05, having rallied as U.S. bond yields surged on
expectations of higher fiscal spending and a faster pace of
Federal Reserve monetary tightening under President-elect Donald
(Reporting by Masayuki Kitano; Editing by Shri Navaratnam)