FOREX-Euro retreats vs dollar as ECB seen flagging future easing
* ECB seen holding rates, but may signal rate cuts * ADP jobs data boosts U.S. dollar prospects * No BoJ action seen this week By Gertrude Chavez-Dreyfuss NEW YORK, March 6 (Reuters) - The euro slid against the dollar on Wednesday, the day before a European Central Bank monetary policy meeting, pressured by expectations the bank may flag future interest rate cuts. The ECB is widely expected to keep policy unchanged at its meeting on Thursday, though President Mario Draghi may use the news conference afterward to hint at prospective policy easing. Projections for both growth and inflation in the euro zone are likely to be on the low side, giving the central bank room to cut rates in the coming months. The dollar, meanwhile, extended gains against the euro and yen after a report showed U.S. private-sector employers added 198,000 jobs in February, another sign of improvement in the labor market. Economists surveyed by Reuters had forecast the ADP National Employment Report would show a gain of 170,000 jobs. January's private payrolls were revised up to show an increase of 215,000 from the previously reported 192,000. But while the ADP jobs data was important ahead of the U.S. non-farm payrolls report on Friday, investors remained focused on the ECB in the nearer term. Some analysts have cited speculation the ECB may cut interest rates on Thursday to help struggling euro zone nations headed for a slowdown. "While I think lowering rates may be feasible, I doubt the ECB will take this step without giving some sort of red flag to the market at least one meeting beforehand to indicate that it may do so," said Neal Gilbert, market strategist at GFT in Grand Rapids, Michigan. "And I believe tomorrow's meeting is where that flag will be waved." The euro was last down 0.5 percent at $1.2993. It was the third time in four days that the euro has traded below the key $1.30 level. So far in 2013, the euro was down 1.6 percent. Some US$3.6 billion in euros changed hands on the Reuters Dealing platform. A political stalemate in Italy following inconclusive elections is also likely to keep the euro subdued. The dollar has also been the most sought-after currency on Wednesday and has been for many weeks, said Samarjit Shankar, director of market strategy, at BNY Mellon in Boston, adding that euro zone investors have been steady buyers of the greenback. "For market participants spooked by the euro's renewed travails, the greenback and Swedish krona have emerged as the safe-havens of choice, while sterling's allure has been severely dented," Shankar said. The dollar index rose 0.5 percent to 82.486. YEN DIPS The dollar hit a one-week high against the yen to 94.11 and was last at 94.10, up 0.9 percent on the day. The euro was up 0.4 percent at 122.24 yen. Some US$1.9 billion in yen changed hands, using Reuters Dealing. The Bank of Japan also holds its two-day policy meeting this week. Investors are expecting no further action from the BoJ and are instead looking at the April 3-4 meeting for some key measures, the first policy review under new governor Haruhiko Kuroda. Kuroda is expected to be formally appointed as governor after confirmation by parliament. He is an advocate of aggressive monetary easing. Traders said an increasingly popular strategy is to bet on dollar/yen moving between 90-91 and 95 yen until April 4, using option strategies. The Bank of England also meets on Thursday and will probably keep rates steady. But if it does something, it would be to add further bond purchases to try to boost the sluggish British economy, analysts said. In late trading, sterling was down 0.7 percent vs the dollar at $1.5032, falling 7.5 percent so far this year. The growth-linked and higher-yielding Australian dollar earlier got a boost from data showing Australia's economy expanded by 0.6 percent in the December quarter, and benefited also from improved risk appetite as the Dow Jones industrial average hit new heights. But by late trading in New York, the Australian dollar traded down 0.2 percent at US$1.0243, hurt by the U.S. currency's broad strength.