The U.S. dollar slid lower against the yen on Thursday as safe haven demand continued to be underpinned amid trade tensions, as investors looked ahead to the European Central Bank’s latest policy decision later in the day.

The dollar was down 0.2% against the yen at 108.21, handing back a bulk of the gains made overnight.

Mexican officials met with their U.S. counterparts for negotiations in Washington on Wednesday aimed at averting U.S. tariffs on Mexican goods next week, although there were no immediate signs of a breakthrough.

In a move that could deepen Washington’s trade conflict with its partners, U.S. President Donald Trump unexpectedly told Mexico last week to take a harder line on curbing illegal immigration or face 5% tariffs on all its exports to the U.S.

“The dollar had risen against the yen earlier on speculation that the U.S.-Mexico negotiations would produce positive results, but headed back down on headlines saying an agreement had not been reached,” said Shinichiro Kadota, senior strategist at Barclay’s in Tokyo. “The focal point today will be on the ECB and how dovish President Draghi could be.”

The ECB makes its monetary policy decision later on Thursday. The central bank will try to give the ailing euro zone a boost and may even set the stage for more action later this year as an escalating global trade war unravels the benefits of years of monetary stimulus.

ECB President Mario Draghi is expected to maintain guidance about the possibility of more stimulus.

The euro was fractionally higher at 1.1226 after retreating 0.3% on Wednesday.

-Investing.com