The dollar edged slightly down against the euro on Thursday, but its losses were limited ahead of a European Central Bank meeting later in the day that could pave the way for further quantitative easing. The ECB is likely to stop short of actually taking new policy steps at the meeting as it awaits fresh indications about the outlook for flagging euro zone inflation. "The consensus view is that we won't see additional stimulus, but the door will be left open," Chris Weston, chief market strategist at IG Ltd in Melbourne, said in a note to clients. "It seems Mario Draghi will try and keep a lid on EUR moves so it may be really hard and risky to be long EUR/USD," he added. The median probability of the ECB extending its 1 trillion euro ($1.13 trillion) asset purchase program beyond its current end date of September 2016 was 70 percent, according to a recent Reuters poll of economists. The same poll saw a 40 percent chance that the ECB would increase its monthly purchases over the next six months. The euro was up about 0.1 percent on the day at $1.1345 EUR=, holding above a 10-day low of $1.1306 touched on Monday but still shy of last week's levels above $1.400. Against its Japanese counterpart, the dollar inched down about 0.2 percent to 119.69 yen JPY=, mired in a familiar range ahead of next week's policy meetings by both the U.S. Federal Reserve and the Bank of Japan. "Volatility is down, so everyone is trying to decrease their dollar call options, but the downside should be limited as well," said Kaneo Ogino, director at foreign exchange research firm Global-info Co in Tokyo. One-month dollar/yen implied volatility JPY1MO=, which measures the cost of hedging against sharp swings in the yen, stood at 8.250 percent on Thursday. That was its lowest level since Aug. 21, and well under two-year highs above 13 percent hit as recently as late August. The Australian dollar, meanwhile, picked itself up from one-week lows plumbed in the wake of Wednesday's sharp fall in Chinese equities markets and a steep drop in crude oil prices. The commodity-linked Aussie is often used as a proxy for China, Australia's main export market. China's benchmark indexes edged higher on Thursday a day after marking their worst daily performance in five weeks in the previous session, which most traders attributed to profit taking. The Aussie added about 0.3 percent to $0.7228 AUD=D4, moving away from the previous session's low of $0.7200, its deepest nadir since Oct. 14. Wednesday's weaker oil prices also weighed on the Canadian dollar. The loonie skidded more than 1 percent against its U.S. counterpart after the Bank of Canada held its key rate steady as expected and also hinted that any hikes would be in the distant future, as it lowered its growth forecasts for both 2016 and 2017. The U.S. dollar was buying C$1.3117 CAD=D4, down about 0.2 percent from late North American trading after earlier rising as high as C$1.3149, its loftiest peak since Oct. 5. ($1 = 0.8814 euros)
