Euro broadly lower after ECB refinancing operation

Investing.com - The euro was lower against all of its global counterparts on Wednesday, as strong demand at the European Central Bank's second long-term liquidity offer boosted demand for higher-yielding assets but weighed on the single currency.

During European late morning trade, the euro was lower against the U.S. dollar, with EUR/USD sliding 0.20% to hit 1.3431.

The ECB said that it had allotted EUR529 billion in three-year loans to European lenders, after receiving bids from 800 banks, significantly more than in the bank’s first long term refinancing operation late last year.

In December, the EBC issued EUR489 billion in three-year loans to 523 banks, averting a liquidity shortage in the euro zone’s banking system and easing pressure on the region’s bond markets.

The high uptake on the operation sparked concerns that banks in the region expect liquidity pressures to continue.

Meanwhile, official data showed that consumer price inflation in the euro zone eased unexpectedly in January, rising by a seasonally adjusted 2.6%, down from a preliminary estimate of 2.7%.

Analysts had expected euro zone consumer prices to remain unchanged.

Elsewhere, the euro was down against the pound, with EUR/GBP shedding 0.45% to hit 0.8425.

In testimony to the U.K. parliament’s Treasury Committee earlier, Bank of England Governor Mervyn King said the ECB liquidity injection has removed the possibility of a bank run in the euro zone and reiterated that the U.K. economy is facing a long and slow recovery.

The single currency slid lower against the yen, with EUR/JPY losing 0.11% to hit 108.16.

Earlier in the day, official data showed a larger-than-forecast increase in Japanese industrial production in January and indicated that output was expected to continue to rise in the coming months.

The euro was steady against the Swiss franc, with EUR/CHF dipping 0.02% to hit 1.2050.

In Switzerland, a report from the KOF Economic Institute showed that the country’s economic barometer improved slightly in February after entering the negative territory in January for the first time since 2009.

The euro was sharply lower against the commodity linked Australian, New Zealand and Canadian dollars, with EUR/AUD falling 0.74% to hit 1.2407, EUR/NZD tumbling 0.93% to hit 1.5911 and EUR/CAD shedding 0.69% to hit 1.3302.

Official data earlier showed that Australia’s retail sales rose for the first time in three months in January, gaining 0.3%.

In New Zealand, data showed that business confidence rose significantly more-than-expected in February, while buildings consents jumped higher in January.

Later in the day, Finland’s parliament was to vote on Greece’s bailout, while the U.S. was to release a preliminary report on fourth-quarter gross domestic product.

In addition, Federal Reserve Chairman Ben Bernanke was due to testify on the semi-annual monetary policy report before the House Financial Services Committee in Washington.