The euro remained at a one-month low on Wednesday amid expectations that European Central Bank policymakers would strike a cautious tone when they met later on Thursday.

A survey by Germany's ZEW research institute showed on Monday that investors' mood had improved more than expected in January and the signing of a China-US trade pact raised hopes Europe's economy would recover. A Citigroup index of euro zone economic activity rose to its highest since February 2018.

But analysts say the improvement in the business surveys is not yet evident in actual economic activity, which remained weak at the end of last year.

“The ECB is likely to acknowledge that downside risks have eased, but there is no need to signal that it plans to deviate from their looser-for-longer policy message at the current juncture,” MUFG strategists said in a note.

Against the dollar, the euro was weaker at $1.1077, its lowest since December 25. It has weakened more than 1 per cent so far this month.

Elsewhere, the yuan dipped and the Australian dollar hit a six-week low on fears the outbreak of a new coronavirus in China would create more problems for the Chinese economy.

The Australian dollar, often used as a proxy bet on the Chinese economy, fell as low as $0.6827, a trough last seen in mid-December, and last stood at $0.6837, down 0.13 per cent.

The concerns surrounding the little-known virus propped up the safe-haven yen, which traded at 109.98 yen, up from Tuesday's low of 110.23.

The yuan had fallen about 0.55% on Tuesday, its biggest decline in almost five months, in onshore trade. It last stood at 6.9063 per dollar, almost flat on the day.

 

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