WSJ:WORLD FOREX: Euro Falls Ahead of ECB, Market Sentiment In Doubt
--The euro falls against the dollar on Australian jobs data and euro zone debt worries
--Traders doubt risk-taking sentiment will continue to improve, with ECB meeting eyed
--G7 meeting may disappoint the market amid high expectations
By Tatsuo Ito
Of DOW JONES NEWSWIRES
TOKYO (Dow Jones)--The euro slid against the dollar in Asia Thursday as a weak Australian jobs report and caution before a policy-setting meeting of the European Central Bank undermined investor appetite for taking on risk.
A rise in the U.S. stock market overnight, as well as a ruling by Germany's supreme court that said financial bailouts of Greece and other struggling euro members are legal, had helped to slightly improve market sentiment.
But that confidence dissipated as weak Australian jobs data caused traders to doubt whether risk sentiment would continue to improve. The country's unemployment rate rose to 5.3% in August compared with expectations for 5.1%.
Caution also prevailed ahead of an ECB meeting and ensuing press conference by ECB President Jean-Claude Trichet later in the global day, with traders nervous of signs of economic weakness in the region or any potential worsening in the euro zone debt crisis.
Analysts in Tokyo expect the ECB to stand pat on its monetary policy, but think a cut in interest rates cannot be ruled out for later this year.
"The situation is far from where we can say a risk trade is on," said Kuniyuki Hirai, foreign exchange division manager at Bank of Tokyo-Mitsubishi UFJ. "There are lots of unsettling factors with regard to Europe," he added.
At 0500 GMT, the euro was at $1.4065 from $1.4098 in late New York trade Wednesday, according to EBS via CQG.
The dollar was at Y77.37 from Y77.26, while the euro was at Y108.81 from Y108.86. The U.K. pound was at $1.5950 from $1.5990. The dollar was at CHF0.8589 from CHF0.8575.
"Trichet will likely take a neutral tone on policy after a worsening of the economic outlook in the region and turmoil in the financial markets," said Junya Tanase, chief currency strategist at JPMorgan in Tokyo.
"A rate cut can't be ruled out in the future if the European economy falls into a recession," he said. But since the situation hasn't worsened that much, Trichet will probably refrain from implying any rate cut later Thursday, he said.
The European debt crisis is likely to be a key issue for discussion when finance ministers and central bankers from the Group of Seven industrialised countries meet in France on Friday.
"The market may be disappointed with the G-7 outcome amid expectations that something concrete on the European problems may come out of the meeting," said Bank of Tokyo-Mitsubishi UFJ's Hirai.
The ICE Dollar Index, which tracks the U.S. dollar against a basket of currencies, was at 75.598 from 75.419.
Interbank Foreign Exchange Rates At 00:50 EDT / 0450 GMT
