* Euro flat at $1.06 after ECB moves spark 2 cent loss
* Dollar bulls still point to attack on parity
* Steepening of euro zone yield curve seen to weigh on euro
* Yen dips half a percent against euro, dollar
By Patrick Graham
LONDON, Dec 9 The euro recovered a foothold on
Friday after an extension of the European Central Bank's
programme of money-printing till the end of next year drove its
biggest daily loss against the dollar since Britain's vote to
leave the European Union in June.
While the bank said it would reduce the monthly value of
purchases, they will continue longer than the market expected
and were accompanied by a handful of other measures judged as
negative for the single currency going forward.
But despite the more than 2-cent fall that resulted on
Thursday, at $1.0612 the euro is still a cent above
November's lows - reflecting doubts over the broader dollar
rally which has dominated the past quarter.
A rise in Federal Reserve interest rates next week seems
fully priced in to markets, and it may take a more bullish
signal on further rises next year from Fed chair Janet Yellen to
provoke more gains.
"Markets have settled down after yesterday's big moves,"
said Adam Cole, head of global FX strategy with RBC Capital
Markets in London.
There are strong arguments for the dollar to keep rising
into next year. U.S. interest rates are already far higher than
the equivalents in Japan and Europe and the broader economic and
policy outlook still also points in opposite directions.
ECB President Mario Draghi emphasised strongly the doubts
that remain over any pickup in European inflation and growth and
the bank reduced its forecast for inflation in 2018 and said it
would still be below its 2 percent target a year later.
"A breach of parity (for the dollar) remains our call," said
Derek Halpenny, European head of global market research at
Japan's MUFG in London.
"There were a number of key elements of yesterday's
announcement that make this a more dovish event than expected
(and) that we believe reinforces the downside risks for
the euro against the dollar."
As well as the inflation outlook, he and a number of
analysts pointed to changes in the ECB's asset-buying rules
which they said should put downward pressure on euro zone
short-term interest rates, further weakening the currency's
Helped by higher U.S. yields overnight, the dollar index was
marginally higher on the day at 101.12 after a 1 percent
rise on Thursday. For the week it was on track to gain just 0.3
Against the yen the greenback was up 0.4 percent at 114.49
yen, within sight of last week's 10-month high of
(Editing by Toby Chopra)