* Dlr cuts early broad losses; European stocks at record low
* Noyer says ECB mulls all monetary policy options
* BoC, ECB, BoE in focus as OECD sees more big rate cuts
* RBA holds rates, sparking buying in Aussie
(recast, adds quotes, updates prices, changes byline)
By Veronica Brown
LONDON, March 3 (Reuters) - The dollar cut early broad-based
losses on Tuesday, as sterling fell and euro gains lost steam
with European stock markets at record lows starting to draw
nervy investors back towards dollar liquidity.
Euro gains were also stemmed after European Central Bank
governing council member Christian Noyer said the euro area's
central bank was studying whether to go further with
unconventional monetary policy and considering all options
[].
The higher-yielding Australian dollar was cheered after the
Reserve Bank of Australia unexpectedly left interest rates on
hold, but market stress showed through via credit default swaps
as the cost of protection against Australian sovereign default
hit record highs.
Illustrating how fragile markets are, European equities fell
to a lifetime low <> briefly pushing U.S. stock futures
<SPH9><DJH9> into negative territory.
"We are seeing an inverse correlation between the dollar and
stock markets. When people are trading on fear about the global
economy then that benefits the dollar," said Chris Gothard,
currency strategist at Brown Brothers Harriman in London.
The dollar index <.DXY>, a gauge of its strength against a
basket of six other major currencies, cut early losses to stand
down 0.3 percent on the day at 88.763.
It had earlier retreated sharply after hitting a three-year
high in overnight Asian trade.
The euro was up 0.2 percent at $1.2606 but well away from
intraday highs of $1.2677 <EUR=>, according to Reuters data.
Sterling turned negative as stocks stumbled. It was last down
0.1 percent at $1.4040 <GBP=>.
RBA STANDS PAT, EYES ON ECB, BOE
The RBA kept rates unchanged at 3.25 percent on Tuesday,
confounding hopes for a cut, saying stimulus already in the
pipeline was helping the country avoid the depths of recession
seen elsewhere [].
The Australian dollar jumped 2 percent to $0.6420 <AUD=>.
But the euro and sterling lost ground after the OECD said it
expected further significant rate cuts from major central banks
including the ECB and Bank of England, with rate verdicts due
from both later this week.
Organisation for Economic Co-operation and Development chief
economist Klaus Schmidt-Hebbel also said the global economic
downturn will be considerably deeper than even the International
Monetary Fund forecast a month ago [].
Before the ECB and BoE, the Bank of Canada is expected to
cut its key interest rate by half a point to a record low of 0.5
percent.
The ECB is expected to cut interest rates to an all-time low
of 1.5 percent from the current 2 percent [], with
the BoE also seen cutting by 50 basis points to a record low 0.5
percent [] and possible detail the roll-out of
alternative monetary policy strategies.
"The belief that quantitative easing will coincide with a
rate cut is doing the rounds again weighing heavily on
sterling," said Maurice Pomery, head of FX at IDEA Global.
"The rate cut is probably of little importance now and the
market will have to decide what impact on the pound will be seen
if they do embark on quantitative easing this week."#
Technical strategists say the pound is vulnerable to key
support at $1.3850, which could open the way to a fresh 23-year
low.
(Additional reporting by Jessica Mortimer)
(Reporting by Veronica Brown; Editing by Chris Pizzey)
