Dollar snaps rally in London

The dollar snapped a three-day rally against the euro on Thursday, but stayed clear of its record lows ahead of the European Central Bank's interest rate decision. The ECB is expected to keep eurozone rates at 4 percent as it assesses the impact of the global credit crunch on the regional economy. Its decision is due at 1145 GMT.
"There is speculation that the ECB could scale back its growth forecasts as result of recent financial market turmoil and the impact that could have on the economy," said Ian Stannard, senior foreign exchange strategist at BNP Paribas.
"But overall, I think the tone of the ECB will remain on the hawkish side and consistent with their wait-and-see stance that could provide the euro with some near-term support," he said.
By 1108 GMT the euro was up 0.2 percent at $1.4108 yet below its all-time high of $1.4281 hit according to Reuters data earlier this week. The dollar surrendered Wednesday's modest gains, made after a number of employment reports suggested Friday's September non-farm payrolls report may show the economy continues to generate jobs following August's surprise drop.
Sterling hit session highs, and was last up 0.2 percent against the dollar to $2.0345 and steady against the euro at 69.33 pence. Investors will focus on ECB president Jean-Claude Trichet's remarks after the rate decision for insight into the bank's thinking on how current global credit crisis is affecting the outlook for eurozone interest rates.
"The ECB is likely to continue to dangle the tightening carrot although it seems increasingly unlikely that such action will be forthcoming as the recent slide in the survey data, service sector PMI yesterday slipping to two year lows for example, is symptomatic of the deteriorating economic backdrop," said Rabobank in a research note.
The euro was last up 0.1 percent against the yen at 164.61 yen, having bounced off a session low at 164.00, while the dollar was steady at 116.71 yen. Traders said selling from Japanese exporters also weighed on the dollar after the US currency rose to a six-week high of 116.79 yen the previous session. The kiwi fell 0.2 percent against the yen to 87.80, while the Aussie was last up 0.1 percent at 103.13, having touched an earlier low of 102.45.