* Euro falls vs dollar after Trichet's comments
* ECB leaves rates unchanged as expected
* US weekly jobless claims rise more than expected
* BoE cuts rates to 1 percent
(Adds comments, details, updates prices)
By Vivianne Rodrigues
NEW YORK, Feb 5 (Reuters) - The euro fell against the
dollar on Thursday as the European Central Bank warned that the
euro zone was undergoing an extended downturn, although it
stood pat on interest rates as widely expected.
ECB President Jean-Claude Trichet had previously hinted
that markets should not expect a rate move at this meeting but
signaled on Thursday that the central bank may resume its
monetary easing cycle in March.
He also said at a press conference that zero interest rates
were not something the bank considered "appropriate," and that
helped limit euro losses. For details, see []
In the United States, a report showed weekly jobless claims
jumped to a 26-year high last week, another sign of
deterioration in the labor markets. []
The news boosted the dollar's appeal as a haven amid a
global downturn, analysts said.
The jobless report is "pretty ugly. Clearly risk is off the
table. And this has hurt the euro against the dollar because
risk-aversion flows are going once again into the dollar," said
Boris Schlossberg, director of currency research at GFT, New
York. "The economy clearly is in desperate need of a stimulus."
In mid morning trading in New York, the euro was 0.3
percent lower at $1.2795 <EUR=>, after trading as low as
$1.2760, according to Reuters data. The dollar was 0.4 percent
higher at 89.84 yen <JPY=>.
In another economic news, the government said new orders
received by U.S. factories slumped by a greater-than-expected
3.9 percent in December. []
"It's the fifth consecutive month of decline ... it's
certainly not a positive and it won't help to contribute to any
pick-up in risk appetite," said Terri Belkas, a currency
strategist at DailyFX.com in New York.
BOE CUT RATES
The euro also fell against sterling which surged after the
Bank of England cut rates by 50 basis points. The BoE's rate
decision put UK interest rates at 1.0 percent compared with
euro zone rates at 2.0 percent.
The euro was last 1.6 percent lower at 87.36 pence
<EURGBP=>.
"The Bank of England's proactive cuts come in contrast with
the ECB's diffidence and this will continue to drive EUR/GBP
lower from current levels," Geoffrey Yu, a currency analyst at
UBS AG said in a note. "
Traders said the euro also remained vulnerable to credit
woes in Russia and eastern Europe.
Russia said on Thursday it would increase stakes in state
banks in coming months. On Wednesday, rating firm Fitch
downgraded Russia's sovereign ratings while Kazakhstan central
bank's decided to devalue its currency.
"The euro has massive problems given the region's
association with eastern European emerging markets as there are
big Italian and German banks with large exposure there," said
Maurice Pomery, a currency strategist at IDEAglobal in London.
(Additional reporting by Gertrude Chavez-Dreyfuss and Wanfeng
Zhou in New York; Editing by Tom Hals)
