WORLD FOREX: Dollar Rises, Euro Falls Waiting For Payrolls
LONDON (Dow Jones)--A small rise in risk aversion has helped the dollar and hit the euro in Europe Thursday as the market waits for the latest U.S. payrolls data.
A meeting by the European Central Bank that finishes at 1145 GMT is expected to leave rates unchanged and have little impact on sentiment.
Meanwhile, the Swedish central bank announced an unexpected 0.25-basis-point cut in its interest rates that hurt the krona and the Swiss franc was kicked a little lower by verbal intervention from the Swiss National Bank.
One of the key developments in Europe was a report from Fitch Ratings that Russian banks may need as much as $60 billion of fresh capital to help them deal with bad loans. Given the exposure euro-zone banks have to Russia, the news immediately undermined support for the euro.
However, risk aversion was already on the rise after Australia reported that its trade gap was much larger than the market anticipated. This all contributed to fears that global economic data - including the payrolls figures later Thursday - will indicate a more extended recession.
The fact that the Riksbank decided to cut its rate against market expectations certainly proves the point that officials remain wary that the downturn is over.
All this uncertainty was reflected in the weak performance of equity markets, with the Nikkei losing 0.6% and then European bourses falling as much as 1.5% at the start.
Despite the dollar's advance, the U.S. currency did face one major drag - the latest calls by China for G8 leaders meeting in Italy next week to discuss alternative reserve currencies.
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China, along with Brazil, India and Russia, has been pushing for other currency units - including the IMF's special drawing rights - to be used instead of the dollar.
By 0930 GMT, the dollar had risen to Y96.69 from Y96.44 late on Wednesday in New York, according to EBS.
The euro was down at $1.4097 from $1.4171 and at Y136.36 from Y136.71.
The dollar was also up at CHF1.0809 from $1.0730, helped in part by verbal intervention from SNB board member Thomas Jordan. He said the bank would continue to buy foreign currencies against the franc on "an ad hoc basis to achieve a large impact."
The SNB last intervened, buying the dollar as well as the euro, last week. Since then, however, the franc has continue to edge higher again.
Elsewhere, the pound is down at $1.6348 from $1.6484 as the U.S. currency waits for the release of payrolls. These are expected to show a fall of 350,000 last month after declining by 345,000 in May.
In Eastern Europe, currencies were mixed. The euro rose a little to HUF269.40 from HUF269.30 and to PLN4.3797 from PLN4.3508. But the single currency fell to CZK25.699 from CZK25.756.