* Euro and sterling fall vs the dollar
* ECB cuts rates 75 bps, BoE by 100 bps
* Riksbank slashes rates by 175 bps, RBNZ cuts by 150 bps
* For up-to-the-minute market news, click on <FXNEWS>
(Recasts, updates prices, adds quotes, changes byline, changes
dateline, previous LONDON)
By Nick Olivari
NEW YORK, Dec 4 (Reuters) - The euro and sterling fell
against the dollar on Thursday after aggressive cuts in
benchmark interest rates by the European Central Bank and the
Bank of England with expectations of more to come.
ECB President Jean-Claude Trichet lowered euro zone growth
expectations for both 2008 and 2009, prompting immediate
volatility in the euro. [] and [].
Trichet was speaking after the European Central Bank cut
interest rates by 75 basis points to leave its benchmark rate
at 2.5 percent.
The Bank of England cut its benchmark rate by 100 basis
points to 2 percent, the lowest level since 1951, and said
further steps would be required to prevent a credit squeeze
tipping Britain's economy into deep recession. [].
"The ECB saw the data coming out and decided a move of more
than 50 basis points would not be unreasonable," said David
Watt, senior currency strategist, RBC Capital Markets in
Toronto. "There's no reason to think the ECB won't have to cut
again."
Early in the New York session, the euro had fallen 0.4
percent against the dollar <EUR=> to $1.2669 though it was well
off the session low, while the pound was down 0.9 percent to
$1.4636.
The pound hit a record low against the euro at 86.95 pence
<EURGBP=>. The yen gained, with the dollar <JPY=> last down 0.8
percent at 92.66 yen, while the euro fell 1.1 percent to 117.42
yen <EURJPY=R>.
Worries about world economic health kept investors wary of
taking on riskier positions, helping to boost the low-yielding
yen broadly.
RATE CUTS
A surprisingly big 175 basis point cut in Swedish borrowing
costs earlier [] and a large 1.5 percentage point
move from the Reserve Bank of New Zealand [] had
already set the tone for aggressive action.
The ECB, seen by some market participants as being behind
the curve in lowering borrowing costs to boost growth, went for
a bolder than expected cut while the BoE disappointed some
investors who had speculated on a move similar to the 150 basis
point reduction imposed in November.
"The central banks are responding with considerable verve.
They recognise the urgency with which they have to cut rates
(and) I don't think this is surprising anybody. If it was any
less the markets would have been a bit upset about it," said
Mike Lenhoff, chief strategist at Brewin Dolphin in London.
Falling interest rates across the globe take away the yield
attraction of currencies whose countries previously had high
interest rates, giving further support to the yen and the
dollar and weighing on higher-yielding units.
Meanwhile, news on the deteriorating state of economies
around the world continued to weigh on market sentiment.
U.S. initial claims for state unemployment insurance
benefits totalled a seasonally adjusted 509,000 in the week
ended Nov. 29 compared with 530,000 the previous week,
according to Labor Department data, which was still in line
with a shrinking labor market and economy.
"We've been so badly battered by all this bad news that
each piece of data is losing its punch," said Boris
Schlossberg, director of currency research at GFT Forex.
(Additional reporting by Steven C. Johnson in New York and
Veronica Brown in London, Editing by Chizu Nomiyama)
