* Euro and sterling retreat against dollar
* ECB and BoE expected to affirm dovish bias
* Dollar/yen rises on steady buying by funds
By Anirban Nag
LONDON, Aug 1 The euro and sterling fell against
the dollar on Thursday as investors sold them before European
Central Bank and Bank of England policy meetings expected to
re-affirm loose monetary policy.
Those moves lifted the dollar off a six-week low against a
basket of currencies hit after the Federal Reserve on
Wednesday gave no fresh hints that it was preparing to scale
back stimulus at its next meeting in September.
The euro was down 0.5 percent at $1.3240, retreating
from a six-week high of $1.3345 struck after the Fed decision.
Sterling fell to $1.5140, helping push the dollar index
0.7 percent higher to 82.056.
The ECB is seen likely to hold off on further stimulus but
to stand by last month's forward guidance that its main interest
rate will stay at 0.5 percent or lower for an "extended period".
The BoE, whose policy decision is due at 1100 GMT, is likely
to stick with its commitment to low rates and prepare markets
for the expected introduction of forward guidance with the
bank's quarterly inflation report next week.
"The ECB will reinforce its dovish message because since
last month, (short-term) rates have edged up, as has the euro,"
said Beat Siegenthaler, currency strategist at UBS. "The ECB
will not be satisfied with this and at the margins, I think they
can even cut rates."
He added this was likely to push the euro lower against both
the dollar and sterling.
Analysts expect the dollar to resume its upward trend in
coming weeks as the Fed is still seen on course to become the
first major central bank to consider withdrawing stimulus.
Most economists expect the Fed to begin slowing its
asset-buying programme as early as next month, especially in
light of data showing U.S. economic growth was stronger than
expected in the second quarter.
"The Fed sounded a bit more dovish on the economy ... just
enough to keep the dollar from going too far on the back of
stronger data. In fact, you saw yields in the U.S. go lower
overnight. That leaves us still waiting for other major central
banks," said Greg Gibbs, senior strategist at RBS in Singapore.
Traders also say a strong U.S. jobs data on Friday could add
to expectations that the Fed could begin scaling back stimulus
in September - a move that would boost the dollar.
The dollar rose 0.8 percent to 98.65 yen on steady
buying by funds, traders said.