Euro down against dollar after Draghi remarks

The euro was lower against the dollar on Monday after European Central Bank President Mario Draghi warned that further gains in the euro would require additional monetary easing to stave off the risk of low inflation.

EUR/USD was last trading at 1.3851, down 0.24% from 1.3883 on Friday. The pair rose 1.3% last week, the strongest weekly performance since September.

The pair was likely to find support at 1.3800 and resistance at 1.3904, Friday’s high.

The drop in the euro came after Draghi said a further appreciation in the euro would trigger additional monetary easing to keep inflation from falling too low.

'A strengthening of the exchange rate requires further monetary stimulus. That is an important dimension for our price stability,' he said. The comments came at a news conference on Saturday, during meetings of the International Monetary Fund.

Data last month showed that the annual rate of inflation in the euro area slowed to 0.5%, well below the ECB’s target of just under 2%. The central bank kept monetary policy unchanged earlier this month, but said it would consider unconventional measures if needed to prevent low inflation from becoming entrenched in the euro zone.

The euro was also lower against the yen, with EUR/JPY down 0.29% to 140.68, from 141.09 on Friday.

Demand for the yen continued to be underpinned as ongoing tensions over Ukraine and investor jitters following last week’s selloff in equities markets supported safe haven demand.

The dollar was fractionally lower against the yen, with USD/JPY dipping 0.06% to 101.56, not far from the three-week trough of 101.31 reached on Friday.

The dollar remained under pressure amid expectations that a rise in interest rates will not be warranted for some time.