* Swedish crown sinks after rate cut, drags Norwegian crown
* Dollar index holds above recent 8-week low
* Focus on U.S. payrolls data after strong ADP report
* Aussie dollar falls after RBA's Stevens warns on currency
(Updates after ECB decision)
By Anirban Nag
LONDON, July 3 The Swedish crown fell to a
3-1/2-year low against the euro on Thursday as the central bank
cut rates more than expected, while Australia's dollar lost
ground after the head of its central bank warned the currency
The 50-basis-point-cut by the Riksbank was double what was
expected and kept the market focus on the crown in an otherwise
quiet session, with investors awaiting key U.S. jobs data.
The European Central Bank kept its policy unchanged as
expected, putting the focus on President Mario Draghi's news
Strong figures from payrolls processor ADP on Wednesday
supported the view that the U.S. economy has bounced back after
a first-quarter slump.
That helped drive benchmark U.S. Treasury yields
to their highest in over a week at 2.63 percent on Wednesday,
which in turned supported the dollar against a basket of major
Yields could rise further if Thursday's jobs data beats
expectations. The dollar was up 0.1 percent against the yen at
101.90 yen and firmer against the Swiss franc.
The euro barely reacted to the ECB decision, trading
slightly lower at $1.3650, with investors cautious before
Draghi's post-meeting news conference. It is due to start just
as the U.S. jobs numbers are released at 1230 GMT.
After cutting interest rates to record lows and revealing a
400 billion-euro loan programme last month, the ECB is not
expected to take fresh policy action this time.
"Yet with inflation so low at 0.5 percent, year-on-year, we
find it unlikely President Draghi will be happy to say nothing
and allow euro/dollar to stage another assault on $1.40 again,"
said Chris Turner, head of currency strategy at ING.
"Short-term rate spreads suggest euro/dollar should be
trading closer to $1.34 than $1.37."
SWEDISH CROWN, AUSSIE STUNG
The Riksbank surprised a market that was expecting only a 25
basis point cut in the repo rate, and the Swedish crown fell to
its lowest since November 2010 against the euro.
The euro rose to 9.39 crowns, from around 9.1950
crowns before the rate decision. It was last trading at 9.3274
crowns, up 1.8 percent on the day.
The Swedish crown's drop led to a sell-off in the Norwegian
crown too. It sank to a 2014 low against the euro with the
single currency hitting a peak of 8.53 crowns, its
highest since December 2013. Both currencies saw a surge in
trading volumes on the Reuters Dealing platforms.
"Nordic central banks will now strive to keep their
currencies weak and support inflation expectations so there is
not much value in looking at longs," said Geoff Yu, currency
strategist at UBS. He recommended investors to stay underweight
on both currencies.
Another big mover was the Australian dollar which
extended losses to trade 0.7 percent lower $0.9380.
It retreated from the eight-month peak of $0.9505 set on
Tuesday after Reserve Bank of Australia Governor Glenn Stevens
warned that investors were underestimating the risk of a
significant fall in the currency.
A weak reading on Australian retail sales added to the
already soft tone of the Aussie dollar, which had retreated on
Wednesday on profit-taking in the wake of disappointing trade
(Editing by John Stonestreet and Hugh Lawson)