* Euro inches up on higher stocks, European PMIs awaited
* Risk appetite remains sluggish, dollar losses limited
* Markets await U.S. payrolls, ECB on Thursday
(Adds comment, details, updates prices; previous TOKYO)
By Naomi Tajitsu
LONDON, July 1 (Reuters) - The euro inched up on Wednesday,
supported by higher European shares, but gains were limited as
traders awaited data on European manufacturing activity due
later in the day.
A weak reading of U.S. consumer confidence on Tuesday kept a
lid on risk appetite and helped to keep the euro away from a
three-week high touched against the dollar the previous day.
Investors awaited a policy announcement by the European
Central Bank on Thursday, as well as U.S. non-farm payrolls,
which will be scrutinised to gauge whether the deterioration in
the U.S. jobs market is starting to stabilise.
The dollar was little changed against a basket of currencies
as many investors remained risk-averse, and analysts said the
market was likely to remain cautious until Thursday's data.
"It is becoming clear that risk appetite is starting to lack
consistency and any catalyst could trigger a broad correction
amid weak summer liquidity conditions," analysts at UBS said in
a research note. "With the ECB and payrolls out tomorrow, the
market is choosing to tread cautiously and we expect this to
remain the dominant theme today."
By 0707 GMT, the euro <EUR=> was up 0.2 percent on the day
at $1.4065, boosted by a 0.8 percent rise in European shares
<> in early trade. But the pair stayed below $1.4152, hit
according to Reuters data on Tuesday, its highest since June 11.
The dollar index <.DXY> which tracks its performance against
a basket of currencies, was essentially flat at 80.100.
Against the yen, the dollar <JPY=> rose half a percent to
96.85 yen, as the Japanese currency came under some selling
pressure across the board.
Traders said Japanese institutional investors were selling
the yen as they put fresh funds to work at the start of the new
quarter, which was having a bigger negative impact on the yen
than a smaller-than-forecast improvement in the Bank of Japan's
June tankan corporate survey on Wednesday [].
PMIS AWAITED
Traders awaited PMIs from European countries and the euro
zone as a whole, which will be released from around 0745 GMT.
The PMIs are expected to show a continuing improvement this
month from May, which would add to the view that the global
economy may be finding a footing.
The Spanish PMI, which has already been released, rose in
June to 42.8 from 39.8 in May, the highest since May 2008 and
well off December's record low of 28.5.
China's PMI, also released earlier on Wednesday, rose for
the fourth straight month in June, showing that the economy is
on more solid ground [], while the Chicago PMI on
Tuesday also showed improvement.
Still, the U.S. Conference Board's consumer confidence
index, also published on Tuesday, fell in June to 49.3 from a
downwardly revised 54.8 for May, suggesting the 18-month-long
recession had yet to loosen its grip on the economy.
A separate report on April U.S. housing prices offered some
encouraging signs that the worst for the housing market may be
over, although it was not enough to buoy investor sentiment.
[]
The U.S. employment report is due on Thursday as U.S.
financial markets will be shut on Friday for the Independence
Day holiday. Economists expect the economy shed 363,000 jobs in
June after losing 345,000 in May. []
Federal Reserve officials said on Tuesday the central bank
should not rush to raise interest rates or remove other
accommodative policies as soon as the U.S. economy climbs out of
recession, though traders said the market's reaction to the news
was limited. []
(Reporting by Naomi Tajitsu; editing by David Stamp)
