Dollar falls against euro on ECB rate expectations; yen slips

NEW YORK, Aug 23, 2007 (AFP) – The dollar traded mainly lower Thursday as the euro gained ground on heightened expectations of an interest rate hike next month by the European Central Bank. But the greenback firmed against the yen, which came under selling pressure after the Bank of Japan held its key benchmark lending rate at 0.50 percent following a two-day policy meeting.

The euro rose to 1.3566 dollars around 2100 GMT, up from 1.3541 dollars in New York late on Wednesday. The single European currency had risen as high as 1.3588 dollars in earlier trading, marking its highest level against the dollar since August 14.

The dollar picked up traction against the Japanese yen, however, as it rose to 116.28 yen, compared with 115.31 yen late Wednesday.

“The market’s current view of (potential) US rate cuts, and now a boost to an (expected) ECB September hike, offers euro/dollar some underpinning,” said Commerzbank analyst Gavin Friend.

The European Central Bank appears set to hike eurozone-wide interest rates next month by a quarter-point to 4.25 percent, analysts said.

In a statement on Wednesday, the ECB confirmed that its monetary policy stance had not changed from