FOREX-Dollar gains further on worries ECB grew uncomfortable with euro rise

LONDON, Sept 3- The dollar’s bounce extended on Thursday as investors trimmed bets against the greenback and sold the euro on concerns that the European Central Bank was worried about its rise. After the euro touched $1.20 earlier this week, worries brewed in the market that the rise had come too fast and strong for the ECB’s liking. ECB policymakers reportedly…

* Greenback rises to one-week high vs euro

* Exception is Japanese yen, last flat vs dollar

* Euro zone PMIs expected to be confirmed at 51.6

* Graphic: World FX rates in 2020 prices, adds chart, comment and latest euro zone data)

By Olga Cotaga

LONDON, Sept 3 (Reuters) – The dollar’s bounce extended onThursday as investors trimmed bets against the greenback andsold the euro on concerns that the European Central Bank wasworried about its rise.

The surge has lifted the greenback about 1.3% above the28-month low it hit against a basket of currencies on Tuesday.

Few analysts expect it to hold for too long, but the dollargained broadly in Asia and, if sustained, this would be thefirst time it has climbed three sessions in a row since May.

After the euro touched $1.20 earlier this week, worriesbrewed in the market that the rise had come too fast and strongfor the ECB’s liking. Fears have intensified after a FinancialTimes report confirming those concerns.

ECB policymakers reportedly warned that if the euro keepsappreciating it will weigh on exports, drag down prices andintensify pressure for more monetary stimulus.

That followed remarks on Tuesday from ECB chief economistPhilip Lane, who said the exchange rate “does matter” formonetary policy.

“Overall the comments suggest that an immediate policyresponse from the ECB to help weaken the euro appears unlikely,and they will rely more on jawboning to dampen euro strength fornow,” said Lee Hardman, currency analyst at MUFG.

A speech from ECB board member Isabel Schnabel at 1500 GMTwill be closely watched for any comments on the currency.

“We may be approaching a phase where the ECB could curb thepace of euro appreciation, but…I have a serious doubt thatthis could send the euro materially lower,” said VasileiosGkionakis, global head of FX strategy at Lombard Odier.

“The dollar correction has yet to run its course,” he said.

The euro was last down 0.4% at $1.1812, havingslipped earlier in the session to a one-week low of $1.1789.

The dollar was up 0.3% against a basket of currencies at92.99.

For about a fortnight now the dollar has been fighting tohold the line after dropping 10% from a March peak. As tradersstart to temper stretched bets on the euro, it could post itsbest week on the common currency in four months.

A stronger dollar helped push the British pound down 0.7% to$1.3263, a six-day low, and the Norwegian crown lowerby 0.5% to 8.90. The Swedish crown followed suit.

Against the Japanese yen, the dollar also rose by 0.3% at106.45, a six-day high. And the Australian dollar fell0.6% at 0.7293.

The euro’s slide was also justified by the euro zone’srebound from its deepest economic downturn on record falteringin August, with some countries in the bloc suffering more thanothers from restrictions imposed to limit the spread of thecoronavirus.

Also, euro zone retail sales defied expectations of a risein July and fell against June despite the lifting ofCOVID-19-related restrictions on economies, data showed onThursday.

Traders will be watching for the initial jobless claims inthe United States at 1230 GMT, which economists polled byReuters expect lower for the week ending Aug. 29.

(Reporting by Olga CotagaEditing by Mark Heinrich and Alexandra Hudson)

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