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FOREX-Kiwi recovers, franc dips, eyes on UK "Super Thursday"

Published 06/08/2015, 06:40 pm
Updated 06/08/2015, 06:46 pm
FOREX-Kiwi recovers, franc dips, eyes on UK "Super Thursday"
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* Raft of BoE releases likely to dominate

* Dollar flat against basket of currencies

* Upbeat services report keeps September Fed hike in view

* Aussie slips after mixed employment signals

By Patrick Graham

LONDON, Aug 6 (Reuters) - The New Zealand dollar was the biggest major currency mover in early European deals, recovering half a percent from a six-year low in otherwise mostly cautious trade before the Bank of England's "Super Thursday" of data releases.

After a mixed bag of signals from the U.S. economy this week, the dollar was back in the middle of the past month's range, having failed for a third time to break below $1.08 per euro and edging 0.1 percent lower on the day to $1.0910.

The kiwi and the Aussie dollar, down 0.4 percent on poor unemployment data, were by far the biggest movers in markets focused on a debate over the timing of rises in British and U.S. interest rates.

The BoE is not expected to move on Thursday but will publish its regular inflation report as well as - for the first time - immediate minutes from the policy meeting, expected to show some members voting for a hike for the first time this year.

"There is a lot of action due today, but people are sitting cautious for the moment," said a trader with one international bank in London.

"There's been an awful lot of hawkish talk this week. My gut feeling is we may get a disappointment from the Bank of England. The inflation report may not be as hawkish as the market seems to be expecting."

The Swiss franc, which traders speculate is being prodded lower by central bank intervention, hit its lowest in four months against the euro after data showed Switzerland slipping deeper into deflationary territory.

"The franc at the moment is the only currency in the G10 space which is weakening against the euro," said Esther Reichelt, a strategist with Commerzbank (XETRA:CBKG) in Frankfurt.

"It seems to us like that is the sharp downward surprise on inflation this morning rather than intervention by the Swiss National Bank. These are signs that the economic situation in Switzerland is deteriorating."

The franc traded at 1.0703 francs per euro, its weakest since March 19. Consumer prices fell 1.3 percent on the year in July.

While expectations have grown that the U.S. Federal Reserve will raise official borrowing costs from zero by the end of the year, the lack of any inflation across the developing world is still holding markets back.

The dollar has attacked $1.08 per euro three times since mid-March and conviction that it will head past parity with the single currency this year or next has waned.

"The market is still reluctant to predict an aggressive tightening cycle by the Fed next year and that is because of inflation," Reichelt said. "At the moment the pricing is for one hike this year and three next - that is simply not enough for the dollar to go higher."

The dollar index, which tracks the greenback against a basket of six major rivals, was steady at 98.033, having hit 98.218, its strongest since April 23, on Wednesday.

The dollar was flat against the yen at 124.905 yen JPY= after briefly popping above 125.000 on Wednesday for the first time since early June.

(editing by John Stonestreet)

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