March 30, 2017 / 12:50 AM / 10 months ago

FOREX-Dollar hovers near 1-week high, buoyed by euro weakness

* Dollar index pulls further away from 4-1/2-month lows

* Prospects of ECB moving away from easy policy tempered for now

* Pound drifts sideways after Britain’s triggering of Article 50

By Shinichi Saoshiro

TOKYO, March 30 (Reuters) - The dollar hovered near a one-week high against a basket of currencies on Thursday, buoyed by a weaker euro which sagged as prospects of the European Central Bank stepping away from monetary easing faded.

The U.S. currency was up 0.1 percent at 111.195 yen, putting some distance between a four-month low of 110.110 plumbed on Monday.

The euro was a touch lower at $1.0760, having drifted down from a 4-1/2-month high of $1.0906 scaled on Monday.

The common currency had dropped about 0.5 percent overnight following a report by Reuters that European Central Bank policymakers were wary of changing their policy message after tweaks this month had raised expectations of the central bank ending its super-easy policy and eventually hiking interest rates.

“The market may have gotten ahead of itself on its expectations towards the ECB ending its easy policy and the news helped temper such speculation,” said Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo.

“That said, the ECB seems set on finding a way out of its easy policy, so it would be difficult for the euro to keep declining. It is no longer a case of the euro being sold on easy policy expectations, with German bund yields settled firmly in positive territory.”

The euro was boosted earlier in the month by a report that the ECB had discussed the possibility of raising interest rates before the end of its quantitative easing programme.

The dollar index against a group of major currencies was steady at 100.020 after rising overnight to 100.130, its highest since March 21.

The greenback was also boosted by Chicago Fed President Charles Evans, who said he was in line with most of his colleagues in supporting further rate hikes this year.

The dollar benefited as some of the dust began to settle after its tumble earlier in the week to 4-1/2-month lows.

The currency slumped on Monday after the U.S. House of Representatives pulled a bill to overhaul U.S. healthcare insurance, which knocked the wind out of the dollar-supportive “Trump trade.”

The pound was little changed at $1.2439 following choppy moves the previous day.

Sterling swung between $1.2478 and an eight-day low of $1.2377 on Wednesday before ending the day little changed, unable to find clear direction from Britain’s formal triggering of its exit from the European Union. (Reporting by Shinichi Saoshiro; Editing by Eric Meijer)

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