SINGAPORE: The dollar weakened against the euro in Asian trade on Thursday with hopes that the European Central Bank (ECB) would signal an interest rate hike after it meets later in the day, analysts said.
The euro bought $1.4865 in afternoon Asian trade compared to $1.4827 in New York on Wednesday. The euro traded at 119.59 yen from 119.79 a day ago, and the greenback changed hands at 80.45 yen from 80.58.
The dollar hit a 17-month low of $1.4940 against the euro in intraday trade Wednesday before recovering.
The euro was gaining against the dollar "on speculation ECB president Jean-Claude Trichet will signal more interest-rate increases after a policy meeting today," said Simon Teo, a senior currency dealer at Phillip Futures in Singapore.
But analysts say the next ECB rate hike aimed at taming euro-zone inflation is at least a month away after Portugal became the third country in the region to seek a bailout.
Expectations that the Fed would not hike interest rates significantly within the year in the face of weaker-than-expected economic data from the US were also providing ballast for the euro against the greenback.
"The dollar retreated as surprisingly soft economic data underpinned expectations that US interest rates will remain low this year," Phillip Futures said in a separate report.
Payrolls firm ADP said Wednesday the private sector added a modest 179,000 jobs in April, lower than the 200,000 expected and down from March's 207,000.
In addition, the Institute for Supply Management's growth index for the services sector fell sharply in April, showing the sector was still expanding but at a much slower pace than anticipated.
Low interest rates are beneficial to businesses as they can borrow for less, but are detrimental to investors looking to park their money in countries offering better returns.
The dollar strengthened against most Asian currencies, gaining to Sg$1.2307 from Sg$1.2295 on Wednesday, to 30.09 Thai baht from 30.06, to 8,553.00 Indonesian rupiah from 8,550.00 and to Tw$28.59 from Tw$28.56.
However, the greenback slipped to 42.93 Philippine pesos from 42.96 a day ago.
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