LONDON (AFP) — The dollar eased against major currencies in thin trading Tuesday ahead of interest rate decisions this week in the eurozone and Britain, dealers said.
In early European trade, the euro firmed to 1.5493 dollars from 1.5492 in New York late on Monday.
Elsewhere on Tuesday, the dollar slid to 104.72 yen from 104.86.
Trading was subdued with Japanese financial markets closed for a public holiday, and London participants returning to work after a national holiday in Britain on Monday.
Dealers turned their focus towards Thursday's monetary policy decisions from the European Central Bank (ECB) and Bank of England (BoE).
"There is a fairly quiet calendar today (Tuesday) ahead of the BoE and ECB decisions on Thursday," said ABN Amro analyst Melinda Smith.
The ECB and BoE were widely forecast to leave their key interest rates unchanged at 4.00 and 5.00 percent respectively, according to analysts.
The US Federal Reserve had last week cut American borrowing costs by a quarter-point to 2.00 percent.
Higher interest rates are usually seen as positive for a currency because investors prefer assets which offer higher yields.
The US currency, which hit a record low of 1.6019 to the euro on April 22, recovered some ground last week before turning lower again.
"The dollar recovery has lost some momentum over the last few days despite the stronger than expected US employment and ISM non-manufacturing reports," said economist Lee Hardman at The Bank of Tokyo-Mitsubishi UFJ in London.
The US factory sector shrank in February for the second time in three months, a survey showed on Monday, highlighting fears about a softening economy.
The Institute of Supply Management (ISM) said its survey of manufacturing activity fell to 48.3 percent from 50.7 percent in January. A number below 50 percent signals declining activity.
James Hughes, market analyst at CMC Markets, said that the foreign exchange market was preoccupied with fears of a potential recession in the United States.
"Yesterday's surprise jump in US ISM data failed to offer any real support for the dollar, arguably as the threat of recession continues to be associated with the US economy by a number of commentators," Hughes said.
Elsewhere, Australia's central bank left interest rates unchanged at a 12-year high of 7.25 percent.
The widely-expected move came as the Reserve Bank of Australia said previous rate hikes in February and March, along with market turmoil stemming from a global credit crunch, had eased demand in the economy.
In London on Tuesday, the euro changed hands at 1.5493 dollars against 1.5492 late on Monday, at 162.27 yen (162.46), 0.7879 pounds (0.7854) and 1.6277 Swiss francs (1.6322).
The dollar stood at 104.72 yen (104.86) and 1.0506 Swiss francs (1.0536).
The pound was at 1.9664 dollars (1.9719).
On the London Bullion Market, the price of gold rose to 878.19 dollars per ounce from 853.50 dollars late on Monday.
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