European central bank boss Mario Draghi says “no limit” to policy tools

The US dollar was almost flat against the euro yesterday despite the stronger-than-expected US monthly jobs data, as markets continued to digest Thursday’s unexpectedly small stimulus from the European Central Bank.

In Europe, Germany’s DAX slipped 0.6 percent to 10,721.62 and Britain’s FTSE 100 lost 0.2 percent to 6,258.87. Avon jumped 19 cents, or 4.8 percent, to $4.18. USA bond prices also fell, sending yields higher. The Dow Jones industrial average rose 343 points, or 2 percent, to 17,820 as of 2:35 p.m. Eastern time.

Still, the dollar resisted falling further as market attention shifted to the release later on Friday of the closely watched U.S.jobs data for November. But it’s hard to know how the Federal Reserve will act.

In the weeks leading up to Governing Council meetings the ECB’s inner core of executive board members regularly sound out national central banks to gauge their positions and formulates proposals it knows will get a comfortably majority. “They did indeed have higher expectations than were there and that’s why they reacted like they reacted but that was not our intention”.

“The big story is the disappointment in the markets as the euro surged through 1.09 after expectations were that we would see more in terms of policy”, said James Hughes, chief market analyst at GKFX.

Investor expectations regarding this month’s European Central Bank policy session were wrong, the bank’s Vice President Vitor Constancio said Friday.

The central bank did not increase the amount of government bonds it buys while the six-month extension of the programme was perceived as bare minimum, given that traders looked for an extension of one year or even making it an open-ended plan. The euro’s stellar rally on Thursday knocked the dollar index back to a one-month low of 97.591, from a 12-1/2-year peak of 100.510 scaled midweek on the coattails of hawkish comments from Yellen. South Korea’s Kospi lost 1 percent to 1,974.40.

Earlier in Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1 per cent. Japan’s Nikkei tumbled 2.2 per cent, down 1.9 per cent for the week, the most in three months.

The news sent the euro soaring 3.1 percent against the dollar Thursday and 2.6 percent against the yen in USA trading.

ENERGY: Benchmark U.S. crude was up 1.3 percent to $41.61 a barrel in electronic trading on the New York Mercantile Exchange.

The dollar was at 122.66 yen against 122.61 yen Thursday in NY.