FOREX-Euro dips on ECB Greek woes; dollar up broadly

Thu Mar 4, 2010 4:13pm EST Related News Euro in reverse, dollar supported ahead of payrollsThu, Mar 4 2010U.S. shares rise on data; euro falls on ECB outlookThu, Mar 4 2010FOREX-Euro falls on ECB, Greek woes; dollar up broadlyThu, Mar 4 2010FOREX-Euro slips vs dollar; ECB unwinds liquidity measuresThu, Mar 4 2010MONEY MARKETS-Euro implied rates up after Greece measuresWed, Mar 3 2010

* Euro slips despite strong Greek bond sale

Currencies

* ECB keeps low rates, to unwind some liquidity measures

* Trichet still sees uneven euro zone recovery

* Dollar higher vs yen; U.S. payrolls data due Friday (Updates prices)

By Steven C. Johnson

NEW YORK, March 4 (Reuters) - The dollar rose broadly onThursday and the euro fell after the chief of the EuropeanCentral Bank said recovery would be uneven, reducing thechances of a near-term rise in record low euro zone interestrates.

Analysts said worries about Greece and other heavilyindebted euro zone countries also weighed on the euro, even asa sale of fresh Greek 10-year debt drew solid demand.[ID:nLDE6230XS]

Greece had announced plans on Wednesday for a further $6.5billion in public sector pay cuts and tax hikes to whittle itsbudget deficit, though it was unclear if the measures willgenerate additional help from larger euro zone countries suchas Germany and France.

While the ECB took a small step toward unwinding someextraordinary support for the economy of the 16-nation eurozone, it extended until October a program that providesunlimited funds to banks at flat rates, longer than mostanalysts had expected.

ECB President Jean-Claude Trichet said the move on thelending program was "exactly appropriate, taking into accountthe present situation." [ID:nLDE6232FX] and [ID:nLDE62307B].

"There"s still a lot of concern about Greece and deficits,and that"s a burden when it comes to tighter monetary policy.So that helped trigger a sell-off in the euro," said KathyLien, director of research at GFT Forex in New York.

The euro was last down 0.8 percent at $1.3585 EUR=.Earlier, it rose above $1.37 following the Greek debt auction.

As expected, the ECB on Thursday kept benchmark interestrates at 1 percent for the 10th month running.

Sterling fell 0.4 percent to $1.5036 GBP= after The Bankof England left rates unchanged and left emergency lendingmeasures in place.

The dollar rose 0.8 percent to 89.12 yen JPY= and 0.8percent to 1.0764 Swiss francs CHF=.

U.S. PAYROLLS DATA DUE

The Federal Reserve also is expected to hold interest ratesat a record low near zero when it meets in mid-March. But mostinvestors expect the Fed to raise rates before the ECB does,which also has lent support to the dollar. Higher interestrates make a currency more attractive to global investors.

Data showing a decline in the number of Americans filingfor first-time jobless benefits also stoked hope about the U.S.economy. Markets expect Friday"s key monthly report on non-farmpayrolls to show employers cut 50,000 jobs last month, thoughanalysts expect some of that will have been influenced by badweather.

"The market is being a bit cautious ahead of payrolls,"said Matthew Strauss, senior currency strategist at RBC CapitalMarkets in Toronto, though he added a better-than-expectednumber could provoke more dollar buying.

By contrast, he said, there are still "uncertainties aboutGreece, about the potential financial assistance it can expect,the opposition from domestic unions," he said. "Uncertainty isstill very much with us, and that"s why the market is notwilling to take the euro much above $1.37." (Additional reporting by Vivianne Rodrigues; Editing by LeslieAdler)

Currencies