LONDON (Reuters) - The dollar weakened on Thursday, correcting some of its strong gains the previous session as European equities rose, helping currencies perceived as higher risk to recover.
Investors were focused on the string of policy decisions due Thursday from the Bank of England, the European Central Bank and the Bank of Canada.
European equities climbed 0.5 percent .FTEU3, rebounding after steep losses the previous day and helping currencies such as the euro and the higher risk Australian dollar to recover against the U.S. dollar.
Elsewhere, the Swedish crown rebounded from earlier 6-week lows against the euro -- prompted by concerns Latvia may devalue its currency -- after news the IMF and European Commission will issue simultaneous statements on the Latvian budget.
Both the ECB and the BoE are expected to keep interest rates on hold at 1.0 and 0.5 percent respectively. The BoE decision at 7:00 a.m. EDT is followed by the ECB decision at 7:45 a.m. EDT and press conference at 8:30 a.m. EDT.
"Stock markets have recovered and they are very much driving currency markets, which has meant a weaker dollar and a weaker yen," SEB currency strategist Johan Javeus said.
"Central bank decisions are the key focus for now," he added.
Markets will be keenly eyeing details of the ECB's covered bond purchase plan [ID:nL3669427], and whether the BoE makes any further announcement on changes to its quantitative easing program, though this is expected to be unchanged for now.
At 6:28 a.m. EDT the euro was up 0.1 percent on the day at $1.4160, while the dollar index fell 0.2 percent to 79.370 .DXY.
The euro hit $1.4337 in early trade on Wednesday, its strongest since December, before falling back on the Asian central bank comments. The dollar index on Tuesday fell as low as 78.334, the lowest this year.
The Australian dollar gained 0.4 percent to $0.8034 while sterling rose 0.4 percent to $1.6352.
Against the yen -- which also tends to fall when stock markets rise -- the dollar rose 0.6 percent to 96.53 yen and the euro gained 0.7 percent to 136.68 yen.
RATE DECISIONS EYED
The dollar has come under pressure in recent weeks partly because the market is nervous about the ability of the United States to finance its growing debt issuance.
As far as the major currencies are concerned, attention now shifts to the central bank rate decisions later in the day. With no changes to actual rates expected, policymakers' comments on non-standard measures such as asset purchases will be the focus.
