By Lisa Twaronite, MarketWatch
TOKYO (MarketWatch) — The dollar gained against the euro in early Asian trading hours Thursday as euro-zone sovereign-debt woes offset an expectations of higher interest rates there, but it continued to edge down against the Japanese yen after of a Bank of Japan policy decision.
The Bank of Japan held off on easing its policy interest-rate range further 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 85.1500, -0.2800, -0.3278%) was buying ¥85.20 following the central bank’s announcement, down from ¥85.43 in late North American trading Wednesday. See real-time currency quotes and tools.
Euro lower
The euro (EURUSD 1.4305, -0.0030, -0.2093%) slipped to $1.4297 from $1.4331 late Wednesday, pressured by news that Portugal’s prime minister said the country would need international financial assistance after the country paid nearly 6% to borrow for 12 months in a government bill auction. Read more on Portugal's request for EU help.
Still, the European unit was supported by wide expectations that the European Central Bank will hike interest rates later Thursday, lifting its key lending rate to 1.25% from 1.0%.
“Although we look for a hawkish message from ECB President [Jean-Claude] Trichet, the market has already priced in a total of 75 basis points of tightening this year,” said Mitul Kotecha, global head of foreign-exchange strategy at Credit Agricole CIB.
“We retain some caution about whether the [euro] will be able to make further headway following the ECB meeting, unless the central bank is even more hawkish than already priced in,” Kotecha said in a note Thursday.
The British pound (GBPUSD 1.6294, -0.0038, -0.2327%) traded at $1.6295, down from $1.6336 late Wednesday.
The dollar index (DXY 75.63, +0.11, +0.15%) , a measure of the U.S. unit against a basket of six major currencies including the euro, rose to 75.636 from 75.535 late Wednesday.
