Thursday September 4, 2008 - 10:52:01 GMT
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Reuters - www.reuters.com
FOREX NEWS-Dollar slips broadly, traders await ECB, BoE
* Profit taking boosts euro/dollar 0.1 percent to $1.4510
* Dollar pauses after recent gains but upside risks remain
* ECB, BoE rate decisions awaited after Riksbank lifts
(Changes dateline, byline, adds comment, updates prices)
By Naomi Tajitsu
LONDON, Sept 4 (Reuters) - The dollar slipped across the
board on Thursday as traders locked in profits from its dramatic
gains in past weeks, while investors awaited interest rate
decisions by the Bank of England and the European Central Bank.
The dollar was set to break a five-day winning streak
against the euro which drove the single currency to an
eight-month low on Wednesday, as traders awaited comments by ECB
President Jean-Claude Trichet after the rate announcement.
The ECB is seen leaving rates unchanged at 4.25 percent and
is expected to issue a new set of economic projections while
rejigging collateral rules. Its rate announcement will come at
1145 GMT, ahead of Trichet's news conference at 1230 GMT
Analysts expect Trichet to balance his acknowledgment of
lower growth by maintaining a tough tone on knock-on inflation
"On the whole, we see Trichet keeping his hawkish stance,"
said Paul Robson, a strategist at RBS Global Banking.
He added that a downward growth forecast and a higher
inflation outlook, as well as the new collateral rules would
provide a varied mix of policy issues for markets to mull, which
could add to volatility in the euro.
"Although it could potentially be a day of unchanged rates
in Euroland and the UK, with the ECB press conference, it could
turn out to be an interesting day."
Central bank rate decisions were the theme of the day, with
Sweden's Riksbank raising rates by 25 basis points to 4.75
percent in a widely expected move.
But it also forecast that borrowing costs will fall in the
future, which put the Swedish crown under selling pressure.
The euro <EUR=> rose 0.1 percent to $1.4510, pulling back
from $1.4384 hit the previous day for the first time since
January. The dollar <JPY=> inched up a touch to 108.50 yen.
The dollar index .DXY slipped 0.1 percent as the U.S.
currency was also weighed by a 0.4 percent rise in oil prices,
which were recovering from a roughly 9 percent fall so far this
Sterling <GBP=> rose 0.4 percent to $1.7820 before the BoE
is seen holding rates at 5 percent, although a cut is seen in
the works later to shore up an ailing economy. Such a view drove
the UK currency to a 2 1/2-year low on Wednesday.
The euro <EURSEK=> rose 0.2 percent to 9.4761, having
recovered from an earlier, initial slide after the Riksbank
TRICHET COMMENTS AWAITED
Along with the forecasts on growth and inflation, investors
eyed changes to collateral rules as the ECB appears set to put a
stop to banks exploiting current rules on swapping complex,
untraded and near impossible-to value assets for ECB funds.
Traders said that the biggest risk facing the euro heading
into Trichet's press conference was the possibility that he may
appear more cautious on the outlook for the euro zone economy,
which could underscore expectations for an eventual rate cut.
Much of the dollar's ferocious gains in the past month have
been driven by the view that ongoing weakness in the U.S.
economy, which had dogged the currency, was bound to have a
negative impact on the state of the global economy, including
the euro zone and the UK.
But some analysts argued that the ECB Governing Council
would emphasise that it will stick to its inflation-fighting
mandate, and that price risks remain high despite a slip in
consumer prices, which may further postpone a rate cut.
"It may be that a dip in July CPI and lower oil prices
suggest inflation has peaked," analysts at Calyon wrote in a
"But recent rhetoric from other Governing Council members
has surprised on the hawkish sides and with the bank still
concerned about the threat posed by a wage price spiral it is
difficult to envisage Trichet diverging from this tone today."
Figures derived from Eonia rates indicate the market does
not anticipate a rate cut until at least the middle of 2009,
despite signs of a slowing economy.
(Editing by Stephen Nisbet)
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