By William L. Watts and Lisa Twaronite, MarketWatch
LONDON (MarketWatch) — The U.S. dollar was mostly higher versus major rivals, gaining ground on the euro as investors awaited an expected rate hike by the European Central Bank and digested Portugal’s long-anticipated decision to seek an emergency bailout.
The euro (EURUSD 1.4298, -0.0033, -0.2302%) slipped to $1.4273 from $1.4331 late Wednesday.
The ECB is expected to deliver its first rate hike since July 2008, lifting its key lending rate to 1.25% from 1%. The central bank is scheduled to announce its rate decision at 7:45 a.m. Eastern, with ECB President Jean-Claude Trichet’s news conference scheduled to begin at 8:30 a.m. Eastern. Read about Thursday's central bank meetings.
Portugal late Wednesday night announced it would seek aid after its borrowing costs hit unsustainable levels. An auction of short-term T-bills on Wednesday saw the government pay a yield of nearly 6% to borrow for 12 months. Read "Portuguese bank stocks gain after aid request."
“The key will be Trichet’s tone in the subsequent conference and any extension of his hawkish rhetoric from the March meeting should keep the euro supported,” said Chris Walker, currency strategist at UBS. “Forex price action has largely overlooked Portugal’s decision to request external financial assistance and rate expectations continue to be the key driver of currencies at this stage.”
The dollar index (DXY 75.62, +0.10, +0.14%) , a measure of the U.S. unit against a basket of six major currencies including the euro, rose to 75.684 from 75.535 late Wednesday.
The British pound (GBPUSD 1.6314, -0.0021, -0.1286%) traded at $1.6298, down from $1.6336 late Wednesday.
The Bank of England’s Monetary Policy Committee offered no surprises, leaving its key lending rate unchanged at a record low 0.5% and making no changes in its asset-purchase program.
“The Bank of England’s decision [...] indicates that serious concerns and uncertainties over the growth outlook deterred the MPC from acting despite the pressure for higher interest rates coming from elevated and still rising consumer-price inflation,” said Howard Archer, chief U.K. economist at IHS Global Insight.
The Bank of Japan held off on easing its policy interest-rate range further on Thursday, but it did establish a special lending facility for financial institutions in areas hit by the March 11 earthquake and tsunami. Read more on Bank of Japan.
The dollar (USDYEN 85.2100, -0.2200, -0.2575%) bought ¥85.03 following the central bank’s announcement, down from ¥85.43 in late North American trading Wednesday. See real-time currency quotes and tools.
