LONDON, July 10 - The euro moved closer to recent two-month lows versus the dollar on Thursday as investors awaited a euro zone interest rate decision at 1145 GMT and hints as to whether rates have further to fall this year. Few see the European Central Bank lowering rates again after a 50 basis point cut in June but investors are looking for hints from ECB President Wim Duisenberg from his news conference at 1230 GMT as to whether rates might come down later in the year. The focus was also on recent recovery in global equities but a mixed day on Wall Street on Wednesday, a fall in Tokyo's Nikkei average and lower U.S. stock futures on Thursday are giving recovery-bulls pause for thought. "No change is expected, it's just one month since we last had a cut and ECB policymakers gave no hints of easing. But the euro is on the weak side because there is still doom and gloom about the euro zone economy while people are becoming more optimistic about the U.S.," said Niels Christensen, currency strategist at Societe Generale. "Japan also has a list of its own good factors but positive expectations are already priced into the Nikkei, but whether the actual economy can live up to it is questionable. And the market knows the BOJ will step in any time."
By 0940 GMT the euro lost a quarter of a percent on the day to $1.1312 , having hit $1.1253 on Tuesday. It fell almost half a percent against the yen to an eight-week low of 133.10 . The dollar was firmer against the Japanese currency at 117.70 after fears of Bank of Japan bids took it higher from 117.40 earlier. In addition, Hiroshi Watanabe, head of Finance Ministry's international bureau, said in European trading hours Japan would not tolerate a yen rise from overseas buying of Japanese stocks. The yen has garnered support in the past few weeks from brightening corporate sentiment, robust macro economic data and rallying stocks.
RATE DAY
The Bank of England also announces a rate decision at 1100 GMT. The market is split as to whether the Monetary Policy Committee, chaired by new Governor Mervyn King, will trim 25 basis points off rates, currently at 3.75 percent, now or in August. Euro zone rates are currently 2.0 percent and Duisenberg sent a clear message last week that no cuts were coming this summer, saying the central bank had done its part and it was now up to the governments to make reforms to boost growth. In Germany, inflation for June was revised down to 0.9 percent on the year. The first pan-euro zone estimate for June put the region's inflation rate at 1.9 percent, below the ECB's two percent tolerance ceiling.
JAPAN RECOVERY STORY
Tokyo's Nikkei stock average <.N225> closed lower for the first time in four sessions after drifting around the psychologically important 10,000 mark for most of the day. Data from the Japanese Finance Ministry showed foreign investors' net buying of Japanese shares ballooned in June to 1.2544 trillion yen ($10.64 billion), the highest level since March 1999. In the U.S., the corporate earnings season is underway with internet media company Yahoo Inc posting a quarterly net profit after the bell which doubled from a year ago but did not outstrip Wall Street estimates. "People were expecting in-line earnings to lift stocks. Weakness in equities is not expected and that could do the dollar some damage," said Aziz McMahon, currency strategist at ABN Amro. Weekly U.S. jobs data is due at 1230 GMT and Federal Reserve Board Chairman Alan Greenspan testifies on U.S. natural gas prices and supply before the Senate Energy Committee at 1400.3 //