Dollar Steadies Following Lack Of Action By ECB, BoE

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The dollar is lower against a basket of major currencies in mid-morning trading on Thursday, although it has steadied as the European Central Bank and the Bank of England held interest rates steady, and as traders are now digesting better than expected employment data out of the U.S.

The ECB held its key interest rate unchanged at a record low of 1% for a fifth straight month, while the BoE held its rates at 0.5%.

The day's U.S. jobless claims data from the Labor Department for the week ended October 3rd showed that claims came in at 521,000, down 33,000 from the upwardly revised 554,000 reported last week. The figure surprised economists who had expected claims to slow to 540,000 from the originally reported 551,000.

The dollar has seen a modest recovery after it slipped to a two week low of 1.4787 against the euro earlier, although it continues to linger near a one year low of 1.4845 set in late September. The day's ECB decision to keep rates unchanged was in line with economists' expectations, with the central bank also retaining its interest rate on the marginal lending facility at 1.75% and on the deposit facility at 0.25%.

The last change in the key interest rate was in May 2009, when the bank cut the rate by 25 basis points to the current level of 1%. The bank has lowered the key interest rate by a total of three and a quarter percentage points since early October 2008. The bank's President Jean-Claude Trichet and Vice President Lucas Papademos are set to hold their post-decision press conference at 8.30 am ET.

Against the pound, the dollar is lingering near a nine-day low of 1.6095. The buck has seen modest downside in recent weeks after setting a four month high of 1.5771 in late September. On the year, the dollar has seen substantial downside falling as low as 1.7043 in August.

The BoE has held its key interest rate at the lowest rate since the central bank was established in 1694. Policymakers also decided to continue with its program of asset purchases totaling GBP 175 billion financed by the issuance of central bank reserves. The MPC expects the program to take another month to complete.

The central bank is set to release the minutes of meeting on October 21st. Initially, the central bank introduced a GBP 75 billion program of asset purchases financed by the issuance of central bank reserves on March 5th. Later, the size of the quantitative easing was raised to GBP 125 billion on May 7th and again to GBP 175 billion on August 6th.

The greenback is also lower against the yen, falling to a mark of 88.1550 earlier in the day. The dollar has found support after testing a 1995 low of 87.08, set back in January.

The dollar is lower against a basket of major currencies in mid-morning trading on Thursday, although it has steadied following unchanged rates from the European Central Bank and the Bank of England, and as traders are now digesting better than expected employment data out of the U.S. (Market News Provided by RTTNews)