Dollar vies for dominance over euro The diverging stances on monetary policy taken by the US Federal Reserve and the European Central Bank became more apparent on foreign exchanges this week. The euro was down 0.9 per cent over the week to $1.3002, and it fell below the $1.30 this week for the first time since early June, leaving many analysts feeling it could yet meet with further weakness. The ECB is likely at Thursday's policy meeting to reinforce the message made this week by Mario Draghi, president, that the central bank's accommodative monetary stance will be in place for the foreseeable future. "While there is justification for the Fed to taper, the eurozone is in no position to allow a tightening of its financial conditions," said Hans Redeker at Morgan Stanley. Hence, the ECB might have to step in and cut interest rates imminently, which would catalyse another leg lower for the euro. The single currency was higher, however, against both the yen and the pound. It climbed 0.5 per cent over the week to Y129.04 against the yen, as the Japanese currency resumed its weaker trend after the country's equity markets calmed following recent volatility. Against the pound, the euro climbed 0.6 per cent to £0.8556 as sterling came under pressure following weaker UK economic data. Sterling shed 1.4 per cent to $1.5199 against the dollar, hitting a three-week low after first-quarter growth was revised down to 0.3 per cent from 0.6 per cent. The pound comes into focus next week again as the Bank of England's Monetary Policy Committee holds its first rate setting meeting under the governorship of Mark Carney. "The UK needs more stimulus to lift real and nominal GDP growth," said Michael Saunders at Citigroup. Major changes are more likely to come at the August meeting than the July one, but we stress the direction of policy rather than the precise timing. US data this week were broadly dollar-supportive and left the currency up 1.4 per cent against the yen at Y99.25, while the dollar index, a measure of the dollar's strength against a basket of other currencies, rose 1.1 per cent to 83.26. The Indian rupee regained lost ground during the latter half of the week after falling to a record low on Wednesday of Rs60.76 against the dollar. It was trading up 1.4 per cent at Rs59.39 on Friday, and was 0.4 per cent higher on the week.