* Dollar steady vs basket of currencies
* Focus on U.S. ADP employment report, euro data
* Investors await interest rate decisions by ECB, BoE
By Kaori Kaneko
TOKYO, Feb 4 (Reuters) - The dollar held steady against a
basket of currencies in cautious trade on Wednesday before jobs
data in the United States and interest rates decisions by central
banks in Europe.
But the U.S. currency trimmed some of the previous day's
losses against currencies such as sterling and the New Zealand
dollar.
Overall, investors were reluctant to tilt positions too far
ahead of key events later in the week, market players said.
"I don't think this is a stage to take on too much risk,"
said a trader for a Japanese trust bank.
Exchange rates may now hover as investors await the U.S.
labour market figures and interest rate decisions from the
European Central Bank (ECB) and the Bank of England (BoE) this
week, dealers said.
The dollar index, which tracks the value of the greenback
against a basket of currencies, was little changed at 84.967
<.DXY> after falling more than 1 percent on Tuesday as hopes for
fresh stimulative economic packages in the United States sapped
demand for the dollar as a safe haven.
Sterling fell 0.3 percent to $1.4423 <GBP=D4> and the New
Zealand dollar dipped 0.3 percent to $0.5125 <NZD=D4>.
Against the yen, the dollar rose 0.2 percent to 89.62 yen
<JPY=>.
There was talk that dollar/yen options with a strike price of
90.00 yen were due to expire over the next couple of days, said
the Japanese trust bank trader, adding that such positions could
keep the pair stuck in a tight range for a while.
Such options positions can lead to dollar buying flows from
options players at levels below the strike price and dollar
selling at levels above. Options-related flows tend to increase
as expiry dates draw near.
Tuesday's data showed pending sales of existing U.S. homes
rebounded in December as buyers waded back into the market to
take advantage of lower prices and mortgage interest rates.
[]
The dollar index had fallen on Tuesday after the unexpected
home sales jump. Risk sentiment further improved and sapped
demand for the dollar on Tuesday as U.S. stocks rose,
buoyed by news that a group of Republican senators had offered a
$445 billion alternative plan for boosting the ailing economy.
[] []
But analysts said currency market players were cautious about
whether U.S. stocks would be able to sustain their gains as the
fate of the stimulus plans remains unclear.
Investors were looking to the U.S. ADP employment report for
January, due later on Wednesday, as a pointer ahead of Friday's
key jobs data.
The euro dipped 0.1 percent to $1.3026 <EUR=> ahead of the
ECB's rate decision on Thursday, when it is widely expected to
take a break in its rate cutting cycle though it may take action
again in March. []
"There are worries that the euro zone economic deterioration
will further deepen as its interest rate cutting has been slow
compared with other major countries," said said Jun Kato, deputy
general manager at Shinkin Central Bank.
"The ECB will have to resume rate cutting (after keeping
rates steady in February), considering the status of the economy
in the area," he said.
The Bank of England's interest rate verdict is also scheduled
for Thursday, and the central bank is expected to cut interest
rates by a half percentage point to 1.0 percent to mark historic
low, according to a Reuters poll.
(Additional reporting by Masayuki Kitano; Editing by Hugh
Lawson)
