* Euro slips despite strong Greek bond sale
* ECB keeps rates steady, to unwind some liquidity measures
* Trichet still sees uneven euro zone recovery
* Dollar higher vs yen after mixed U.S. data
(Adds details, updates prices)
By Vivianne Rodrigues
NEW YORK, March 4 (Reuters) - The euro fell versus the
dollar on Thursday as comments by the European Central Bank
reinforced the view interest rates in the region will remain
low in the foreseeable future.
The euro rose earlier after Greece's sale of 10-year bonds
drew solid demand. But the currency later succumbed to selling
pressure after European Central Bank President Jean-Claude
Trichet stuck to his view euro zone economic recovery would be
uneven and fragile.
And though the ECB took a small step toward unwinding some
extraordinary support for the economy, it left much of its cash
buffer for banks in place. For details, see []
[].
"The main take-away is that Mr. Trichet's comments so far
are consistent with the view that the (European Central Bank)
will keep rates at record lows perhaps longer than its U.S
counterpart," said Joe Manimbo, a currency trader at Travelex
Global Business Payments in Washington. "That's putting some
downward pressure on the euro."
In midday trading in New York, the euro was 1 percent lower
at $1.3559 <EUR=>, after trading as high as $1.3712, according
to Reuters data.
Earlier the ECB said it was keeping its benchmark interest
rate on hold at a record low of 1 percent for the tenth month
running, as expected by economists.
The ECB said it would return next month to competitive
tenders for three-month loans for banks, a sign it is more
comfortable with money market conditions. It balanced the move
by extending unlimited funds at flat rates until October,
longer than most analysts had expected.
The comments reinforced expectations the U.S. Federal
Reserve is likely to hike interest rates before the ECB -- a
move that would boost the value of dollar-based assets.
Greece's highly anticipated bond sale drew strong demand,
but investors were wary of whether new measures would be enough
to contain its fiscal crisis. The bond sale comes a day after
it unveiled plans for a further $6.5 billion in pay cuts and
tax hikes to cut its deficit.
"Although easing concerns over Greece have likely caused a
reduction of short euro positions over the last couple of days,
market enthusiasm for buying the euro remains limited," said
Vassili Serebriakov, a currency strategist at Wells Fargo Bank.
In the United States, economic data was mixed. The dollar
rose versus the yen after a report showed first-time filings
for unemployment benefits fell as expected last week.
[]
But the greenback pared some of its earlier gains after
another reading showed contracts for pending sales of
previously owned homes unexpectedly fell in January.
[]
"Pending home sales is a negative for the U.S.," said Meg
Browne, senior currency strategist at Brown Brothers Harriman
in New York. "It is a sign that the housing market is losing
some momentum."
The dollar was last 0.7 percent higher at 89.04 yen <JPY=>.
BOE DECISION
Comments from a deputy governor of China's central bank
that Chinese inflation expectations can be controlled also
prompted traders to cut long dollar/yen positions.
[] Traders expect it to hold above the
psychologically key 88.00 yen level, but direction may be
determined by Friday's U.S. jobs data. <ECONUS>
Sterling turned slightly higher on the day against the
dollar <GBP=>, hitting a session high of $1.5136 after the Bank
of England left interest rates at 0.5 percent and held fire on
its quantitative easing program. []
This was as expected, but analysts said there was relief
among some investors that the bank did not expand QE following
some recent weak UK data.
(Additional reporting by Wanfeng Zhou and Nick Olivari in New
York; Editing by Kenneth Barry)
