By V. Phani Kumar, MarketWatch
HONG KONG (MarketWatch) — The euro recovered some of the ground it lost overnight against the dollar ahead of a widely expected interest-rate increase by the European Central Bank later Thursday, while the Australian dollar rallied on the back of strong employment data.
The euro EURUSD +0.10% was buying $1.4325 during Asian trading hours, after dropping to $1.4303 in late New York trading after Moody’s downgrade of Portugal’s ratings triggered fresh concerns about European sovereign-debt issues.
The euro’s rebound came ahead of the ECB’s rate-setting meeting later in the day, where the central bank is expected to hike its key lending rate to 1.5% from 1.25%. Read ECB rate decision preview.
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Credit Agricole strategists wrote in a note to clients that the passage of Greece’s austerity package last week “cleared the last hurdles” for this rate hike, and that despite a general weakness in recent data on economic activity, price inflation risks have remained on the upside.
“Beyond the hike, the market will focus on the tone of the statement and likelihood of the next move. Our central case remains for the Refi rate to be raised again in October,” they said.
Meanwhile, the dollar index DXY +0.10% , which measures the U.S. unit’s value against a basket of six other major currencies, slipped to 75.050 from 75.088 late in New York, also reversing some of the gains recorded in North American trading.
The Australian dollar climbed against the greenback after official data showed a sharp increase in full-time employment. Read full story on Australia’s employment data.
The Australian unit AUDUSD +0.36% was at $1.0739, rising off the day’s low of $1.0684.
But the dollar was trading higher against the British pound, which extended losses ahead of the Bank of England’s rate decision, also due later Thursday. The BoE is expected to leave its policy rate unchanged.
The pound GBPUSD -0.17% was changing hands for $1.5973, down from $1.5993.
Against the Japanese unit, the dollar USDJPY +0.07% was fetching ¥80.93, little changed from ¥80.94 in New York.
Varahabhotla Phani Kumar is a reporter in MarketWatch's Hong Kong bureau.
