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FOREX-Euro up vs dlr in choppy trade; ECB, BoE in focus

Published 06/04/2009, 11:05 AM
Updated 06/04/2009, 11:17 AM

* Euro up vs dollar after ECB leaves rates unchanged

* Trichet: important U.S. expressing support for dollar

* Swedish crown recovers from 6-week low against euro (Recasts, updates prices, adds comment)

By Nick Olivari

NEW YORK, June 4 (Reuters) - The euro swung between gains and losses but was trading up slightly against the dollar in choppy trade on Thursday following the European Central Bank's decision to keep interest rates unchanged.

A comment by ECB president Jean-Claude Trichet at a news conference after the bank's policy meeting, that it was important that Washington had expressed support for a strong dollar, gave the U.S. unit a boost against the euro zone single currency and helped mute losses in the greenback.

The ECB kept rates on hold at a record low 1.0 percent but said it expected a much sharper recession in the euro zone this year than previous forecasts.

The bank also reiterated plans to buy 60 billion euros in covered bonds, spread across the euro zone, in both primary and secondary markets. The bonds would be rated AA or equivalent.

The pound was lower against the dollar after the Bank of England also left its benchmark rate unchanged.

Euro trading "is just a 50-point move on whatever the most recent statement was," said John McCarthy, director of foreign exchange at ING Capital Markets in New York. "All of the statements by central bank chiefs were pretty benign though sober: a recovery in 2010 but anemic."

The euro was last up 0.1 percent at $1.4175, according to electronic trading platform EBS, having swung between a peak of $1.4242 and a low $1.4070 over the global session.

Trichet said he appreciated the U.S. government's 'strong dollar' statements.

"I would say it's very important and we appreciate enormously that the U.S. authorities are repeating that a strong dollar is in the interests of the United States of America, which has been repeated by the Secretary of the U.S. Treasury recently," Trichet said.

The dollar index, which measures the dollar against a basket of six currencies, was 0.2 percent lower at 79.312.

Earlier, the Bank of England left key rates unchanged at a record low 0.5 percent and stuck to its 125 billion pound target for quantitative easing as expected. The pound was last 0.6 percent lower against the dollar at $1.6200, according to Reuters data.

The Canadian dollar dipped against the U.S. currency on Thursday after the Bank of Canada kept rates unchanged, as expected, but acknowledged the economic threat posed by the recent sharp appreciation of the Canadian currency.

The Canadian dollar fell 0.7 percent to C$1.1060, according to Reuters data.

The Canadian central bank made no mention in its statement of unconventional monetary policy easing, such as printing money to buy securities, signaling it maintains the view that further stimulus is not required any time soon.

The Swedish crown rebounded from 6-week lows against the euro, prompted by concerns Latvia may devalue its currency.

The euro fell 0.4 percent to 10.8640 crowns, according to Reuters data, after earlier hitting a six-week low against the euro of 10.9832 per euro on hopes of fresh IMF support for Latvia.

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

"Our attention has been directed away from it recently, but the problem in Latvia has not resolved itself and I believe there is a nontrivial chance of a currency devaluation in Latvia this year," said Michael Woolfolk, senior currency strategist at Bank of New York-Mellon in New York.

"At this stage there is a good chance a devaluation could spread to other parts of emerging Europe as well as other emerging regions," he said. (Additional reporting by Mary Angela Rowe; Editing by James Dalgleish)

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