FOREX-Dollar resumes downtrend; ECB, BoE eyed

FOREX-Dollar resumes downtrend; ECB, BoE eyed...

Elsewhere, the Swedish crown rebounded from earlier 6-week lows against the euro -- prompted by concerns Latvia may devalue its currency -- after news the IMF and European Commission will issue simultaneous statements on the Latvian budget.

Both the ECB and the BoE are expected to keep interest rates on hold at 1. 0 and 0. 5 percent respectively. The BoE decision at 1100 GMT is followed by the ECB decision at 1145 GMT and press conference at 1230 GMT.
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> "Stock markets have recovered and they are very much driving currency markets, which has meant a weaker dollar and a weaker yen," SEB currency strategist Johan Javeus said.

"Central bank decisions are the key focus for now," he added.

Markets will be keenly eyeing details of the ECBs covered bond purchase plan, and whether the BoE makes any further announcement on changes to its quantitative easing programme, though this is expected to be unchanged for now.

At 1028 GMT the euro was up 0. 1 percent on the day at $1. 4160, while the dollar index fell 0. 2 percent to 79. 370.

The euro hit $1. 4337 in early trade on Wednesday, its strongest since December, before falling back on the Asian central bank comments. The dollar index on Tuesday fell as low as 78. 334, the lowest this year.

The Australian dollar gained 0. 4 percent to $0.

8034 while sterling rose 0.

4 percent to $1. 6352.

Against the yen -- which also tends to fall when stock markets rise -- the dollar rose 0. 6 percent to 96. 53 yen and the euro gained 0. 7 percent to 136. 68 yen.

RATE DECISIONS EYED

The dollar has come under pressure in recent weeks partly because the market is nervous about the ability of the United States to finance its growing debt issuance.

As far as the major currencies are concerned, attention now shifts to the central bank rate decisions later in the day. With no changes to actual rates expected, policymakers comments on non-standard measures such as asset purchases will be the focus.

The market is waiting to see details of the ECBs previously announced covered bond purchase plan to keep long-term rates down, and see what it projects for economic growth and inflation this year and next.

The BoE is seen likely to stick to its 125 billion pound ($208 billion) target for quantitative easing.

The Bank of Canada is expected to keep rates on hold at 0. 25 percent but could make some mention of the Canadian dollars recent rise.

Meanwhile, the Swedish crown hit a six-week low against the euro of 10. 9832 per euro as speculation mounted that Latvia might be forced to devalue amid increasing strains on its banking system and economy.

The Swedish currency is highly sensitive to any trouble in Baltic countries due to the substantial exposure of Swedish banks to the region.

It recovered, however, on hopes the announcements by the EU and IMF could lead to the IMF coming out with a new package. At 10. 22 GMT, the euro fell 0. 7 percent versus the crown to 10. 8330 crowns.

"This situation is worth watching and not just for its impact on the Swedish krona. It does have the capacity to lift risk-aversion at a time when there are already some very tentative signs . . that risk-taking might be about to wane a bit," said Steve Barrow, head of G10 currency strategy at Standard Bank in a.

Reuters/12:41
FOREX-Dollar resumes downtrend; EC

FOREX-Dollar resumes downtrend; ECB, BoE eyed

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