* ECB decision due at 1145 GMT, press conference 1230 GMT
* Trump's delay to scheduled tariff hike boosts markets
* China's offshore yuan gains 0.5%, Aussie hits 6-wk high
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
(Writes through, adds quotes, details)
By Tommy Wilkes
LONDON, Sept 12 (Reuters) - The euro hovered near $1.10 on
Thursday as traders prepared for the European Central Bank to
unveil an expected stimulus package, while China's yuan and
Australia's dollar rallied on further signs of a thaw in the
U.S.-China trade war.
Investors expect a rate cut at Thursday's meeting as the ECB
tries to prop up the region's ailing economy. The real
uncertainty is whether policymakers restart a quantitative
easing (QE) programme after some ECB members expressed doubt in
recent weeks about the need to relaunch asset purchases.
Euro/dollar overnight implied volatility has soared to its
highest since mid-2018 EURONO= , reflecting investor
uncertainty about the impact of the ECB announcement on the
single currency.
The ECB decision is scheduled for 1145 GMT, and president
Mario Draghi's press conference at 1230 GMT. The meeting is the
first in a series of major central bank events, with the Federal
Reserve and the Bank of Japan meeting next week.
SEB strategist Jussi Hiljanen said he expected the ECB to
cut the deposit rate by 10 basis points from the current level
of -0.4%, extend the forward guidance on rates by six months and
announce the restart of QE but with monthly purchases lower than
the market anticipated.
"Such a package of stimulus measures would be a
disappointment for the market, pushing long rates higher and
EUR/USD higher and steepening the curve," Hiljanen said.
The common currency EUR=EBS has shed 3.4% since June but
was 0.2% higher at $1.1028 on Thursday.
Stephen Gallo, European Head of FX Strategy at BMO Capital
Markets, said that if the ECB prepares the market for
significant rate cuts ahead, "that would be quite dovish, quite
bearish" for the euro.
However, he said the reaction would be contained as traders
were reluctant to take positions on the dollar before next
week's Fed meeting.
The dollar was slightly lower against a basket of currencies
at 98.528 .DXY .
RISK RALLY
After a difficult August in which concerns about a global
recession sparked a scramble into safer assets, markets have
rallied this month, encouraged by easing trade tensions and by
receding fears of a no-deal Brexit.
China on Wednesday exempted a basket of U.S. goods from its
tariffs, while U.S. President Donald Trump said in a tweet he
would delay a scheduled tariff hike by two weeks in October.
Export-driven currencies across Asia strengthened, as did
most emerging market currencies .MIEM00000CUS .
The Aussie hit a six-week high of $0.6887 AUD=D3 and the
offshore Chinese yuan rose 0.5% CNH=EBS to a three-week high
of 7.0737 per dollar. The Japanese yen, the go-to safe haven currency for fearful
investors, fell to a six-week low against the dollar. The yen
breached the 108 mark in Asian trade and was last at 107.86 yen
per dollar JPY=EBS . It had hit a seven-month high of 104.46
last month.
Sterling was little changed GBP=D3 EURGBP=D3 . The pound
rocketed to a six-week high against the dollar on Monday as
investors welcomed the British parliament's move to block a
no-deal Brexit on Oct. 31.
Despite the more positive mood in risk assets this week,
analysts expressed caution about its sustainability.
"The bigger picture is one of a very tense geopolitical
environment that is unlikely to be rectified quickly," BMO's
Gallo said.
China's offshore yuan vs dollar https://tmsnrt.rs/2AbkJJF
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(Editing by Hugh Lawson and Gareth Jones)