Dollar stable before European rate decisions
LONDON: The dollar was little changed against most rival currencies on Thursday, but rose against the British pound as investors awaited interest rate calls from the Bank of England and the European Central Bank.
In late morning trading here, the European single currency eased to 1.4408 dollars from 1.4411 dollars in New York late on Wednesday.
Against the Japanese currency, the dollar rose slightly to 95.35 yen from 94.97 yen late Wednesday. The pound meanwhile slid to 1.6982 dollars from 1.7000.
Traders were waiting for monetary policy decisions from the Bank of England and European Central Bank, which were both expected to keep interest rates at record lows as they hope for economic recovery.
The BOE announces its latest policy call at 1200 GMT, followed by the ECB at 1245 GMT.
Some analysts predict that the British central bank will announce a 25-billion-pound (29 billion euro, 42-billion-dollar) extension to its quantitative easing (QE) plans.
Under QE, central banks purchase government bonds from commercial insitutions in the hope of kick-starting lending.
"The European Central Bank's decision is perhaps easiest to anticipate: its refinancing rate will remain at 1.0 percent for a fourth month and Jean-Claude Trichet will acknowledge the economic problems that euroland still faces," said analysts at currency specialists Moneycorp in London.
"As for the Bank of England, there can be much less confidence in the prediction.
"Although there is zero chance of an interest rate move the committee is bound to say something about its QE programme.
"The Bank still has 25 billion pounds in the kitty from the 150 billion pounds authorised by the Treasury in January."
Meanwhile, renewed risk aversion dampened demand for the euro -- seen as a more risky bet than its main rivals -- after a drop in Chinese shares.
"Currency dealers have been focusing on share price moves to gauge players' risk tolerance. If Shanghai is losing that much, you just can't buy euros," Satoshi Tate, a dealer at Mizuho Corporate Bank, told Dow Jones Newswires.
Chinese share prices fell 2.44 percent by midday Thursday after the central bank said it would "fine-tune" its monetary policies, raising fears that credit would be tightened, traders said.
A gloomier-than-expected snapshot of the US services sector added to uncertainty about the prospects for an economic recovery.
The Institute of Supply Management said its index of the non-manufacturing sector fell to 46.4 percent in July from 47.0 percent in June, the 10th consecutive monthly decline.
In London on Thursday, the euro was changing hands at 1.4408 dollars against 1.4411 dollars late on Wednesday, at 137.31 yen (136.86), 0.8479 pounds (0.8478) and 1.5297 Swiss francs (1.5296).
The dollar stood at 95.35 yen (94.97) and 1.0624 Swiss francs (1.0611).
The pound was at 1.6982 dollars (1.7000).
On the London Bullion Market, the price of gold rose to 963.19 dollars an ounce from 960.50 dollars an ounce late on Wednesday.