The dollar fell on Wednesday but held above recent record lows against the euro ahead of key US jobs data this week, which will likely offer evidence of the state of the US economy. The euro pared some of the losses made after European politicians and officials voiced concern about the dollar's weakness this week.
But held below its all-time highs against the US currency as caution set in ahead of the European Central Bank's policy meeting on Thursday. "The issue with regard to tomorrow and what (ECB President Jean-Claude) Trichet has to say and the fact that that there has been a rising tide of comment from European politicians has, for the moment, taken a bit of the edge off the euro's rally," said Simon Derrick, head of currency research at Bank of New York Mellon.
"That will be temporary because it does come down ultimately to the interest-rate differential story," he said. The dollar has rallied broadly since the start of the week from a sell-off prompted by a surprisingly large Federal Reserve rate cut last month and anticipation of further easing as US data points to a slowing economy.
By 1044 GMT the euro was up 0.2 percent at $1.4172, edging back toward this week's record high of $1.4281, according to Reuters data. Coming up later in the session is the ADP report about US private-sector employment, which often serves as a gauge for the wider monthly non-farm payrolls number, due on Friday.
Payroll figures last month showed a shock fall of 4,000, the first contraction in employment in four years, after which the Fed cut rates. A Reuters poll shows analysts are expecting the ADP report will show an increase of 58,000 jobs versus a gain of 38,000 in August, though speculation on Wednesday centered on another possible undershoot.
The non-manufacturing ISM index is expected to have eased to 55.0 in September from 55.8, still above the 50 waterline between growth and contraction. Meanwhile, the Australian dollar neared 18-year highs against the dollar and two-month highs against the yen after strong retail sales data.
The Aussie's gains, combined with strong performance in equity markets, helped boost risk appetite and encourage investors to enter carry trades, where purchases of high yielders are funded by cheap borrowing in currencies like the yen, which on Wednesday fell broadly.
The Aussie rose as high as US $0.8919, about a third of a cent away from 18-year highs set earlier this week. The New Zealand dollar also firmed, adding 0.5 percent versus the US currency 1.2 percent against the yen. The dollar was up 0.5 percent at 116.25 yen and the euro rose 0.6 percent to 164.76 yen.
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