FOREX-Dollar slips against euro, oil, GSE worries weigh

TOKYO, Aug 28 (Reuters) - The dollar slipped from a six-month high against the euro on Thursday after comments by a European Central Bank official the previous day scaled back speculation about an ECB rate cut.


ECB Executive Board member Axel Weber, widely considered one of the most influential ECB policy-makers, told Bloomberg News that any talk about lower interest rates in the euro zone was premature.


A rise in oil prices also supported the euro while the dollar remained weighed down by troubles in the U.S. financial system, due to uncertainty over how housing finance firms Fannie Mae and Freddie Mac will be bailed out of the current crisis.


The euro's recovery helped limit yen gains against other currencies and kept the dollar in narrow ranges against the Japanese currency.


"Weber's comments were hawkish and the market now appears to be looking for reasons to push the euro higher, with an eye on upcoming euro zone data," said Hiroshi Yoshida, a trader at Shinkin Central Bank.


German unemployment data is due later in the day and euro zone consumer price data is due on Friday.


"Oil prices holding up is also positive for the euro, suggesting the euro may start to recover from recent selling," Yoshida said.


Market players barely reacted to a Japanese newspaper report which said the United States, Europe and Japan had planned to intervene and rescue a weak dollar in March. [ID:nN27489995]


Japan's top financial diplomat, Naoyuki Shinohara, said on Thursday he had no comment on the report and said there was no change in Japan's foreign exchange policy. [ID:nTKU003023]


Traders in Tokyo said the news itself will likely have little impact because conditions have changed and the dollar has rebounded significantly since then. But the report may stir expectations of intervention in the future if exchange rates reach extreme levels.


The euro was up 0.3 percent at $1.4763 , recovering from a six-month low at $1.4570 hit on Tuesday.


The dollar eased 0.1 percent versus the yen to 109.40 yen .


The dollar also fell against a basket of six major currencies, retreating from this year's highs.


The dollar index, a measure of the greenback's value against six major currencies, fell 0.2 percent to 76.860 <.DXY>, having hit a 2008 high on Tuesday at 77.619.


Despite U.S. economic weakness, the dollar had been benefiting from growing signs since late July that economic weakness has spread beyond the Unites States.


With a deteriorating global economy, central banks in Britain and Australia are expected to lower rates at some point to help shield their economies from the threat of recession, while the Federal Reserve is widely seen holding rates steady for months.


A slew of weak euro zone economic data this week had fuelled expectations that the ECB's next move would be to cut rates, but with such views dimming after Weber, the dollar's advantage may also weaken, traders said.

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