By Satomi Noguchi
TOKYO, April 24 (Reuters) - The euro fell against the dollar
on Thursday, extending the previous day's sharp drop, as
investors trimmed positions before German corporate sentiment
data that could provide more clues on the health of the euro zone
economy.
The New Zealand dollar slipped after the country's central
bank kept interest rates at a record-high 8.25 percent as
expected, but hinted it may cut borrowing costs sooner than
markets had anticipated.
The euro had retreated further on Wednesday from a record
high against the dollar after soft economic data and comments
from European policymakers indicating that the weaker U.S.
currency is hurting euro zone economic growth.
The single currency had reached an all-time high above $1.60
earlier this week after hawkish comments from European Central
Bank Governing Council member Christian Noyer led investors to
ponder whether the ECB's next move would be to raise rates rather
than cut them.
But demand for the euro slid after Noyer later said markets
had misinterpreted his remarks.
In addition, Jean-Claude Juncker, chairman of the euro zone
group of finance ministers, said the euro's exchange rate was
excessively volatile, prompting investors to trim their bets for
further euro gains above $1.60.
"The euro may fall below $1.58 if the German data comes out
really weak," said Minoru Shioiri, chief manager of forex trading
at Mitsubishi UFJ Securities.
"But it would stay above $1.55 unless U.S. indicators turn
out to be strong or hawkish remarks pop up at the (Federal
Reserve) meeting next week."
The euro fell 0.2 percent to $1.5854 <EUR=>, off the record
high of $1.6020 hit on Tuesday.
"The euro is taking a breather after its sharp rise against
the dollar this week," said Kengo Suzuki, a currency strategist
at Shinko Securities.
The Munich-based Ifo economic research institute's business
climate index is due at 0800 GMT and is expected to show a slip
to 104.3 in April from 104.8 in March.
The single European currency was little changed at 164.35 yen
<EURJPY=R>, off a four-month high of 164.94 yen hit on Tuesday.
The dollar rose 0.3 percent to 103.67 yen <JPY=>, but stayed
below a two-month high of 104.66 marked last week.
KIWI DOWN
The dollar's recovery comes as investors see the Fed pausing
its aggressive run of rate cuts after an expected quarter-point
trim next week to 2.0 percent.
The Wall Street Journal reported on Thursday that the Fed
would likely lower the federal funds rate at its two-day policy
meeting that ends next Wednesday but may then be ready to take a
break.
The ECB is expected to keep its key interest rate on hold at
4.0 percent.
Traders said currencies of countries that had expressed
concerns about inflation have benefited in recent sessions, while
currencies of those with little scope for raising rates tended to
be sold.
The Reserve Bank of New Zealand kept interest rates on hold
on Thursday, but said the economy was slowing more than expected.
That suggested the central bank may cut rates -- the highest in
the industrialised world -- sooner than markets had previously
expected to shore up a slowing economy. []
The New Zealand dollar dipped 0.1 percent to $0.7943
<NZD=D4>.
(Additional reporting by Tetsushi Kajimoto; Editing by Brent
Kininmont)
