By William L. Watts and V. Phani Kumar, MarketWatch
FRANKFURT (MarketWatch) — The euro was little changed versus the dollar in choppy trade 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 -0.18% fetched $1.4304 in recent trade, little changed from $1.4303 in late New York trading on Tuesday, when the 17-nation shared currency was pressured after a downgrade by Moody’s of Portugal’s ratings triggered fresh concerns about European sovereign-debt issues.
The ECB later Thursday is expected to hike its key lending rate to 1.5% from 1.25%. Read ECB rate decision preview
ECB President Jean-Claude Trichet’s monthly news conference, however, is likely to be dominated by questions surrounding the euro-zone’s long-running debt crisis and efforts by banks and European officials to fashion some type of rollover of Greek government debt without triggering a default designation from major ratings companies.
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 75.034 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 +0.32% traded at $1.0733, 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 -0.16% changed hands for $1.5979, down from $1.5993.
Against the Japanese unit, the dollar USDJPY +0.07% bought ¥80.96, little changed from ¥80.94 in New York.
William L. Watts is a reporter for MarketWatch in Frankfurt.
Varahabhotla Phani Kumar is a reporter in MarketWatch's Hong Kong bureau.
