FOREX-Euro dips on ECB





The dollar rose broadly on Thursday and the euro fell after the chief of the European Central Bank said recovery would be uneven, reducing the chances of a near-term rise in record low euro zone interest rates.

Analysts said worries about Greece and other heavily indebted euro zone countries also weighed on the euro, even as a sale of fresh Greek 10-year debt drew solid demand.

Greece had announced plans on Wednesday for a further $6.5 billion in public sector pay cuts and tax hikes to whittle its budget deficit, though it was unclear if the measures will generate additional help from larger euro zone countries such as Germany and France.

While the ECB took a small step toward unwinding some extraordinary support for the economy of the 16-nation euro zone, it extended until October a program that provides unlimited funds to banks at flat rates, longer than most analysts had expected.

ECB President Jean-Claude Trichet said the move on the lending program was "exactly appropriate, taking into account the present situation." .

"There's still a lot of concern about Greece and deficits, and that's a burden when it comes to tighter monetary policy. So that helped trigger a sell-off in the euro," said Kathy Lien, director of research at GFT Forex in New York.

The euro was last down 0.8 percent at $1.3585 EUR=. Earlier, it rose above $1.37 following the Greek debt auction.

As expected, the ECB on Thursday kept benchmark interest rates at 1 percent for the 10th month running.

Sterling fell 0.4 percent to $1.5036 GBP= after The Bank of England left rates unchanged and left emergency lending measures in place.

The dollar rose 0.8 percent to 89.12 yen JPY= and 0.8 percent to 1.0764 Swiss francs CHF=.

U.S. PAYROLLS DATA DUE

The Federal Reserve also is expected to hold interest rates at a record low near zero when it meets in mid-March. But most investors expect the Fed to raise rates before the ECB does, which also has lent support to the dollar. Higher interest rates make a currency more attractive to global investors.

Data showing a decline in the number of Americans filing for first-time jobless benefits also stoked hope about the U.S. economy. Markets expect Friday's key monthly report on non-farm payrolls to show employers cut 50,000 jobs last month, though analysts expect some of that will have been influenced by bad weather.

"The market is being a bit cautious ahead of payrolls," said Matthew Strauss, senior currency strategist at RBC Capital Markets in Toronto, though he added a better-than-expected number could provoke more dollar buying.

By contrast, he said, there are still "uncertainties about Greece, about the potential financial assistance it can expect, the opposition from domestic unions," he said. "Uncertainty is still very much with us, and that's why the market is not willing to take the euro much above $1.37."