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The euro holds near one-week lows versus the dollar on Thursday as worries about Europe's sovereign debt problems outweighed a widely expected interest rate hike by the European Central Bank.
if anything, a softening in ECB President Jean-Claude Trichet's hawkish stance, or even a lack of more hawkish comments, could further weigh on the euro, traders said.
"If Trichet's comments just underline expectations of gradual tightening in the future, the market may be disappointed and sell the euro," said Katsunori Kitakura, chief dealer at Chuo Mitsui Trust Bank.
Concern that Greece's debt crisis would spread to other highly indebted peripheral euro zone countries flared up this week after Moody's slashed its rating for Portugal to junk status.
Moreover, the Moody's Investors Service has today downgraded the government-guaranteed debt of four Portuguese banks - Caixa Geral de Depositos (CGD), Banco Espirito Santo (BES), Banco Comercial Portugues (BCP) and Banco Internacional do Funchal (Banif).
Still, analysts don't expect the euro to fall too sharply in the months ahead, underpinned by higher interest rates.
The dollar benefited from the euro's woes, rising against a basket of major currencies. The dollar index climbed near 75.00, pulling further away from a one-month low of 74.13 set earlier in the week.
The Australian dollar recovered from a dip to one-week lows after data showed Australian employment rose by more than expected in June.
The number of people employed in Australia rose by 23,400. That was higher than the median estimate for a 15,000 increase. The jobless rate held at 4.9%.
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