Dollar firms on divergent monetary policy expectations

The dollar firmed against a basket of currencies on Friday, as rising expectations of monetary easing by other major central banks offset fading chances of more rate hikes from the Federal Reserve.

The dollar index .DXY =USD, which tracks the greenback against a basket of six major rivals, rose about 0.2 percent to 99.260, below Thursday's more than one-month session high of 99.790. But it was still on track to mark a gain of 0.3 percent for the week.

The dollar edged up about 0.1 percent against the yen to 117.80 JPY=, on track for a weekly gain of about 0.6 percent.

It remained well above Thursday's session low of 115.97, which was its deepest nadir since January 2015, a move that likely did not go unnoticed by policymakers at the Bank of Japan.

The BOJ is likely to cut its core consumer inflation forecast for the coming fiscal year to possibly below 1 percent at a policy review next week, according to three sources familiar with its thinking.

Japan's central bank is "taking a serious look" at expanding its monetary easing measures as sliding oil prices make it harder to reach its 2 percent inflation target, the Nikkei newspaper reported on Friday.

The euro slumped about 0.2 percent against its Japanese counterpart to 127.72 EURJPY=EBS after notching a low of 126.17 on Thursday, its lowest since April.

BOJ Governor Haruhiko Kuroda said on Thursday that he is not thinking of adopting a negative interest rate policy now, signalling that any further monetary easing will likely take the form of an expansion of its current massive asset-buying program.

The euro was down about 0.3 percent at $1.0846 EUR=EBS, poised for a weekly dip of about 0.7 percent, though it managed to bounce off a two-week low of $1.0776 touched in the wake of European Central Bank President Mario Draghi's comments.

European Stock Market News - ECB's Monetary Easing

In currencies, the euro slipped 0.1 percent to fetch $1.1010 EUR= after climbing a to one-month peak of $1.1044 overnight.

The common currency, already on a bullish footing after the ECB's monetary easing last week fell well short of expectations, received a further boost after Governing Council member Ewald Nowotny suggested on Wednesday the markets were expecting too much stimulus from the central bank.

A notable mover in Asia was the Australian dollar, which soared after a report showed Australian jobs surged by 71,400 in November, pushing the unemployment rate to a 19-month low of 5.8 percent. That followed strong gains in October, making this the strongest two-month total in 28 years.

Despite questions about the reliability of the data, the Aussie jumped 0.9 percent to $0.7300.

The New Zealand dollar also advanced after the Reserve Bank of New Zealand (RBNZ) cut interest rates early on Thursday but said further easing should not be needed.

The kiwi traded at $0.6730 NZD=D4 after gaining more than one percent in response to the central bank's statement.

Draghi says ECB willing to act fast on rates, QE to boost inflation

The European Central Bank is ready to act quickly to boost anemic inflation in the euro zone, its president said on Friday, highlighting changes to its asset purchase program and deposit rate as possible tools.

Mario Draghi's comments offered the strongest hint yet that the ECB will unveil fresh stimulus measures at its Dec. 3 meeting to stop inflation from falling further below its target of just under 2 percent.

The ECB has bought 60 billion euros ($64 billion) a month of mostly government bonds since March to help revive inflation, but prices rose just 0.1 percent in October.

Draghi defended the ECB's quantitative easing (QE) asset purchase program, saying it had brought down borrowing costs for euro zone companies. He said the scheme could be expanded and extended and its composition changed to provide further stimulus.

He said the ECB could also change the level of its deposit rate to boost the impact of QE. The ECB's deposit rate is currently -0.20 points, meaning banks are charged to park cash at the ECB, giving them an added incentive to lend, rather than pile reserves at the central bank.

Markets are expecting further ECB action on Dec. 3, most likely including a further cut to the deposit rate and an extension of the asset purchases beyond their scheduled end in September 2016.