(Changes dateline, byline, updates prices, quotes)
By Meg Clothier
LONDON, Nov 8 (Reuters) - The dollar teetered close to its all-time lows against the euro on Thursday as the market waited to see whether the European Central Bank would voice concern about the sharp rally in the single currency.
The ECB is widely expected to announce no change in its 4.0 percent interest rate later on Thursday, so all eyes will be on what President Jean-Claude Trichet says about the conflicting challenges of euro strength and a jump in inflation.
"Although we remain euro/dollar bullish longer term, the risk is a pull-back today as the ECB suggests the exchange rate is back on the policy radar," RBC Capital Markets said in a client note.
Meanwhile investors remained perturbed by expectations that the Federal Reserve could cut rates again next month, further reducing the dollar's yield appeal, with stock futures (SPc1: Quote, Profile, Research) already pointing to a weak start on Wall Street.
"Euro/dollar is not being driven by more fundamental factors, but by worries about whatever negative news emanates from the U.S., whether it's about industrials or the banking sector," said Michael Hart, currency strategist at Citigroup.
"It's going to remain very volatile."
On Wednesday, Morgan Stanley (MS.N: Quote, Profile, Research) said it took a $3.7 billion loss from its subprime mortgage exposure. And General Motors Corp (GM.N: Quote, Profile, Research) reported its biggest ever quarterly net loss of $39 billion, adding to fears the U.S.'s credit problems could be spreading to the wider economy and hurting growth.
By 0848 GMT, the euro was up slightly at $1.4664 <EUR=>, after surging to an all-time high of $1.4730 on Wednesday according to Reuters data.
The dollar index (.DXY: Quote, Profile, Research), which measures its value against a basket of six major currencies, was down 0.15 percent at 75.481, off its record low of 75.077.
"I don't think we're at the beginning of a huge dollar sell-off, rather I think we're nearing the end of a dollar adjustment as the evidence grows that the U.S. is going to slow down," Hart added.
BOE ALSO IN FOCUS
The Bank of England is also due to announce an interest rate decision on Thursday, with markets mostly expecting it to hold at a six-year high of 5.75 percent.
"An unchanged decision, in line with RBC economists' expectation, would likely see a moderate relief rally for the pound," RBC said.
Sterling was trading almost flat at $2.1016 <GBP=>, having scaled fresh 26-year highs on Wednesday.
Traders said the yen could gain against the dollar and high-yielding currencies on further slides in U.S. equities, which would prompt risk-averse investors to unwind carry trades in which they use the yen to buy higher-yielding currencies.
The dollar was little changed at 112.75 yen <JPY=>.
Currencies of natural resource-rich countries such as Australia and Canada have been the biggest gainers from a rally in commodities that has pushed gold to a 28-year peak <XAU=> and U.S. crude oil futures to record highs (CLc1: Quote, Profile, Research).
But traders said these currencies may suffer sharply if stock markets slump and reduce investors' risk appetite.
(Additional reporting by Chikako Mogi and Satomi Noguchi)