FOREX-Euro slides to 2-mth low vs dollar; Trichet eyed

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By Simon Falush

LONDON, May 8 (Reuters) - The euro hit a two-month low against the dollar on Thursday, hurt by a report that U.S. and European officials want the dollar to strengthen, while the European Central Bank kept rates steady at 4 percent.

Investors awaited comments from ECB President Jean-Claude Trichet at a post-decision news conference for clues on whether softer regional economic data will prompt less hawkish language, which would fuel more speculation of a rate cut in the future.

The yen jumped, pushing the dollar and euro more than one percent lower at one point as sagging stock markets encouraged the unwinding of carry trades.

The dollar hit a two-month high against a basket of major currencies after a Financial Times report said the United States and Europe now have a united desire to see the dollar strengthen against the euro, citing officials on both sides of the Atlantic [ID:nT351863].

The single currency has been on the back foot in recent weeks after hitting a record high of $1.6018 on April 22 as poor economic data has started to eat away at a perception of a resilient euro area economy and increased prospects of rate cuts to come.

The ECB faces a policy dilemma in the current climate of high food and oil prices and slowing growth as the currency zone is proving vulnerable to fallout from the ongoing global credit crisis.

Trichet has previously sounded a hawkish tone on monetary policy, stressing inflationary risks and any retreat from this stance will be taken as a sign that rates may be heading lower later this year.