Dollar continues posting losses

The dollar weakened against major currencies Thursday as the pound got a lift from the Bank of England's rate cut and investors considered bleak economic news from Europe. The Bank of England lowered its key interest rate by half a percentage point to 1.5% Thursday, the lowest rate in the bank's 315-year history.

When a central bank lowers its rate, it tends to weaken its currency. However, sterling rebounded off the news because many investors were expecting a larger cut, up to three-quarters of a point, according to Tom Benfer, director of foreign exchange at BMO Capital Markets.

That surprise likely caused many speculators who had shorted the pound to buy it back to cover their positions, causing it to rise, Benfer said.
The British pound rose against the dollar 0.65% to $1.5197 from $1.5114 late Wednesday.
In announcing its cut, the Bank cited weakening consumer spending, a tightening credit market for households and businesses, and a deteriorating business and residential investment outlook.

The euro also made gains against the dollar despite consumer confidence in the European Union and euro zone falling to record lows.
The 15-nation euro was up 0.59% against the dollar, trading at $1.3726 from $1.3623 late Wednesday.
The European Central Bank is widely expected to cut its key interest rate at its meeting next week.
The greenback dropped 1.49% against the Japanese yen, purchasing ¥91.28 down from ¥92.59.

Benfer also said that the dollar weakened as investors started looking to Friday's report on job losses in December.
"People are just getting prepared for tomorrow's bad payroll number," he said.
Employers are expected to have cut 500,000 jobs from their payrolls in December after cutting 533,000 jobs in the previous month, according to Briefing.com forecasts.
The unemployment rate, generated by a separate survey, is expected to have risen to 7% from 6.7% in the previous month.

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