By Deborah Levine and Virginia Harrison, MarketWatch
An earlier version of this report misstated the month covered by Australian unemployment data. The report has been corrected.
NEW YORK (MarketWatch) — The dollar extended gains on the euro Thursday after European Central Bank President Jean-Claude Trichet said officials had to cut their forecasts for euro-area economic growth, raising speculation that the central bank may be done raising interest rates for the year.
The euro EURUSD -0.87% fell to $1.3973, down from $1.4045 in U.S. morning trading and from $1.4093 in North American trade late Wednesday.
The dollar index DXY +0.42% , which measures the U.S. unit against a basket of six currencies, rose to 75.883, from 75.489 Wednesday.
In his monthly press conference, Trichet said that the pace of growth in the euro zone has decelerated and that the risks to inflation seem more balanced.
Analysts have lately mused if the European Central Bank may feel compelled to cut interest rates to support growth as the sovereign-debt crisis and requisite slashing of government spending in countries to combat it threaten the region’s economy.
“Trichet is preparing the market for a possible change of course if the GDP data show further deterioration,” said Boris Schlossberg, director of currency research at GFT.
Earlier, the European Central Bank left its key lending rate unchanged at 1.5%, as expected. Read more on European Central Bank and Bank of England policy meetings.
The central bank may have to show an increased willingness to delay its exit strategy further as the euro-zone region faces a slowing recovery, said DailyFX analyst David Song.
“The deadlock on Greece’s second bailout package, paired with the ongoing turmoil within the financial system, has put increased pressures on the European Central Bank to shore up the economy,” Song said.
The Bank of England also held rates steady at its policy meeting on Thursday.
“While we think there is a risk for a quantitative easing announcement today, the Bank of England will more likely wait until November before proceeding, giving them time to downgrade their inflation forecast,” strategists at BNP Paribas said before the meeting ended.
The absence of that kind of announcement boosted the British pound against the U.S. dollar.
Sterling GBPUSD +0.16% turned up to $1.6011, from as low as $1.5911 during Asian hours and from $1.5975 late Wednesday.
Fed’s Bernanke on deck
Also Thursday, Federal Reserve Chairman Ben Bernanke is due speak on the outlook for the U.S. economy and the possibility of further quantitative easing, his last scheduled speech ahead of the Federal Open Market Committee meeting on Sept. 20-21. Read preview of Bernanke’s speech.
“We doubt Bernanke will announce any big, but we expect he is likely to attempt to manage expectations for the policy response that may be expected at this September’s meeting,” said analysts at Brown Brothers Harriman.
Attention will also be fixed on President Barack Obama’s plans to spur U.S. jobs growth, in his address to a joint session of Congress due to be delivered later Thursday. Read a preview of Obama’s address.
Against the Japanese currency, the dollar USDJPY +0.07% erased a loss to trade at 77.39 yen, from ¥77.36 late Wednesday. Japan’s current-account surplus for July left investors disappointed, as government data showed exports shrank slightly but imports grew. See story on Japan’s current-account surplus.
The Australian dollar AUDUSD -0.36% dropped after a weaker-than-expected jobs report, paring losses to $1.0612 from $1.0630 ahead of the data. Read more about Australia’s jobless rate.
Deborah Levine is a MarketWatch reporter, based in New York.
Virginia Harrison is a MarketWatch reporter based in Sydney.
