LONDON (AFP) — The dollar climbed against the euro on Wednesday the day before a widely-expected interest rate cut by the European Central Bank, dealers said.
In late European trading here, the European single currency dipped to 1.2650 dollars from 1.2710 dollars late in New York on Tuesday.
Against the Japanese currency, the dollar dropped to 93.15 yen from 93.27 yen on Tuesday after more worse-than-expected data on the US economy.
The European Central Bank (ECB) was almost certain to deliver the third eurozone interest rate cut in less than two months on Thursday, analysts said.
With the eurozone in recession and inflation falling sharply across the 15-nation bloc, the ECB was widely expected to slash its main interest rate from 3.25 percent on Thursday with the only question being by how much.
It emerged on Wednesday that services activity in the nations sharing the euro retreated faster than expected in November, according to a survey which analysts said increased the chances of a big ECB rate cut.
"This is a horrible survey across the board, showing that the eurozone service sector is being hit ever harder by the financial crisis, muted consumer spending and markedly weaker activity in key export markets," said IHS Global Insight economist Howard Archer.
"The extremely weak November service sector purchasing managers' survey exerts significant extra late pressure on the ECB to deliver a deep interest rate cut on Thursday," he said.
The prospect of falling borrowing costs in the eurozone weighed on the single currency because lower interest rates makes it a less attractive investment.
Meanwhile, the eurozone service sector activity index, compiled by data and research group Markit, fell to 42.5 points in November from 45.8 points in October, exceeding a first estimate of 43.3 points.
Markit said that the slump, marking the sixth consecutive month of decline, brought the index to the lowest level in the survey's 10-and-a-half-year history.
The British pound also sank against the dollar ahead of a widely anticipated rate cut from the Bank of England.
The BoE was forecast to slash British borrowing costs on Thursday for a second month running in an bid to spur economic growth as the country teeters on the brink of recession.
Last month, the BoE slashed its key lending rate by a record 150 basis points or 1.5 percentage points to 3.0 percent -- the lowest level in more than half a century.
In the US, a worse-than-expected loss of 250,000 US private sector jobs in November was the "largest decrease ... since November of 2002 (and) ... offers evidence of a labor market that continues to weaken," human resources firm ADP said.
The government's own figures are due out Friday and are likely to show 325,000 job losses, after 240,000 in October, analysts forecast.
The US November ISM service sector survey also tumbled to 37.3 points from 44.4 points in October, again much worse than forecast.
In London trade on Wednesday, the euro changed hands at 1.2650 dollars against 1.2710 dollars late on Tuesday, at 118.05 yen (118.57), 0.8573 pounds (0.8525) and 1.5373 Swiss francs (1.5335).
The dollar stood at 93.15 yen (93.27) and 1.2140 Swiss francs (1.2063).
The pound was at 1.4774 dollars (1.4906).
On the London Bullion Market, the price of gold fell to 766.25 dollars an ounce from 780 dollars late on Tuesday.
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