* Market watching what oil does next
* Concerns about more credit losses undermines dollar
* Aussie rises on strong jobs data
* BoE expected to leave interest rates at 5 percent
By Chikako Mogi
TOKYO, July 10 (Reuters) - The dollar edged up against a
basket of currencies on Thursday as oil prices inched lower, but
investors remained cautious due to worries about more
credit-related losses and the economy.
Though the dollar found support from a dip in oil prices,
traders were wary of oil surging back towards the record peak of
$145.85 hit last week, as high energy costs undermine the weak
U.S. economy and hurt the currency.
Oil settled at $136.05 a barrel <CLc1> on Wednesday after
rising above $138 on escalating tensions between Iran and the
West over Tehran's nuclear programme.
U.S. stocks fell on worries about financial institutions,
with Fannie Mae <FNM.N> and Freddie Mac <FRE.N>, the two largest
U.S. mortgage funders, tumbling again on Wednesday on worries
they would need to raise billions of dollars in additional
capital.
Merrill Lynch <MER.N> shares fell more than 9 percent after
Fitch Ratings said it may cut the U.S. investment bank's debt
rating due to expected ongoing write-downs and diminished
prospects for earnings. Merrill is among several big financial
institutions due to report earnings next week.
"The market is focusing on the credit issue ahead of next
week's earnings, and the dollar remains pressured as players keep
a close eye on stocks, which have been falling on credit worries,
and oil prices," said Mitsuru Sahara, a senior trader at Bank of
Tokyo-Mitsubishi UFJ.
At the same time, the dollar was surprisingly resilient
despite talk of more troubles in the U.S. financial sector,
traders said.
"There is caution among dollar sellers, sensing that globally
there may be a shared interest in keeping the dollar from sliding
further," Sahara said.
The dollar index, which tracks the dollar's performance
against six currencies, inched up 0.1 percent to 72.658 <.DXY>.
The dollar rose 0.2 percent to 106.94 yen <JPY=>.
The euro slipped 0.1 percent at $1.5723 <EUR=>.
The Aussie climbed 0.5 percent to $0.9601 <AUD=D4>, getting a
boost from data showing Australian companies added 29,800 jobs in
June, exceeding a forecast for a rise of 10,000, while the
unemployment rate eased to 4.2 percent. []
The Aussie had marked a three-week trough near $0.9475 on
Wednesday when a key measure of consumer sentiment hit a 16-year
low and further scaled back expectations for an interest rate
hike.
BERNANKE, BoE AHEAD
A senior dealer at a European bank said downward revisions to
first-quarter gross domestic product growth in the euro zone and
data showing a fall in French and German exports in May would
likely cap the euro's rise.
"The dollar and euro are in a tug-of-war as both have weak
spots. The pair is likely to remain in tight ranges," he said.
Federal Reserve Chairman Ben Bernanke and Treasury Secretary
Henry Paulson are slated to testify on regulatory restructuring
before the House Financial Services Committee later on Thursday.
The dollar was boosted when Bernanke said on Tuesday that he
was willing to keep open the emergency lending facility for
investment banks into 2009. Investors were waiting to see if he
would keep that soothing tone.
Sterling slipped 0.2 percent to $1.9800 <GBP=D4> before the
Bank of England announces its interest rate decision at 1100 GMT.
The market expects the BoE to leave rates at 5.0 percent
until it has a better idea of which is the greater evil, surging
inflation or slowing economic growth.
Inflation is running at its fastest pace since the BoE won
the power to set interest rates in 1997.
(Additional reporting by Rika Otsuka; Editing by Brent
Kininmont)
