LONDON (MarketWatch) -- The U.S. dollar was steady against major counterparts Thursday, halting its rise as a bout of intense selling pressure on the euro and the British pound abated.
The dollar index , a measure of the greenback against a trade-weighted basket of six major currencies, traded at 85.637, little changed from 85.602 in North American action late Wednesday.
The euro traded at $1.2812, off slightly from $1.2823. The single currency plunged Wednesday and has lost more than 5 cents against the dollar since the end of last week.
The euro has also fallen sharply against the Japanese yen this week, but traded at 125.13 yen in recent action, up slightly from 124.58 late Wednesday.
The pound was little changed against the greenback at $1.6220, holding steady after plunging to a five-year low of $1.6135 on Wednesday.
The dollar fell to 97.46 yen from 98.04.
Economists said upside remains for the yen and the dollar.
"Risk aversion remains high, defensive currencies are outperforming, rate cycles have turned lower and the [U.S. dollar] and [Japanese yen] continue to gain, benefiting from ongoing de-leveraging and repatriation flows, in our view," said Martin McMahon, currency strategists at Credit Suisse in Zurich.
European equity markets remained on the defensive. See Europe Markets.
Asian equities lost ground Thursday, following steep losses on Wall Street Wednesday. See Asia Markets.
Monthly British retail sales volume for September posted a smaller-than-expected drop of 0.4%, the Office for National Statistics reported, compared to expectations for a 0.7% drop.
Annualized sales were up 1.8%, the weakest rise since February 2006 and below expectations for a 2% rise.
Economist Benjamin Williamson of the Center for Economic and Business Research said the data reinforces expectations for further, aggressive rate cuts by the Bank of England. The central bank earlier this month slashed its bank rate a half-point to 4.5% as part of a coordinated, global rate cut.
"The underlying growth in retail sales remains positive but continues to slow," he said. "Looking forward, the slowdown is likely to continue, gathering pace as house prices continue to slide, unemployment increases and earnings growth weakens."
Pressure is mounting for a cut of at least another 50 basis points, or half a percentage point, at when the bank's Monetary Policy Committee meets Nov. 6, Williamson said.
The euro posted little reaction to a steeper-than-expected drop in August factor orders across the 15-nation euro zone.
Industrial new orders in the 15-nation euro zone saw a monthly decline of 1.2% in August and were down 6.6% compared to August 2007, the statistical agency Eurostat reported Thursday. Expectations were for a 0.5% monthly rise and a 0.4% year-on-year decline.
The Swedish krona gained ground despite the Swedish Riksbank's decision to cut its repo rate by a larger-than-expected 50 basis points to 3.75%. See full story.
The euro is down 0.4% against the krona to 10.0232 per euro.
"Elsewhere, we expect the [European Central Bank] to cut interest rates a little more aggressively than the markets currently expect," said Ben May, economist at Capital Economics. "This, coupled with the fact that the Swedish economy looks set to outperform the euro-zone, suggests that the krona may reverse some of its recent falls against the euro over the coming months."
The central bank had hiked rates as recently as September in response to inflation fears. Thursday's move, combined with a half-point cut earlier this month as part of a global rate move, marks a full percentage point reduction in the repo rate within two weeks.
And the Riksbank said a further cut of 50 basis points would likely be required over the next six months to combat the effects of the global financial crisis.
