Euro loses momentum, Aussie stung by jobs surprise

The euro slipped in Asia on Thursday and faces headwinds from suspicions that Europe's efforts to fix its debt crisis may not be fast enough to keep markets happy, while the Australian dollar was knocked by a surprise decline in the country's employment levels.

Still, any zeal to sell the common currency is, at least for now, being countered by expectations that Federal Reserve Chairman Ben Bernanke might drop clearer hints on the likelihood of more stimulus later this month.

The market's immediate focus is on the European Central Bank, which is expected to signal a change in policy direction by halting an interest-rate rise cycle as the euro zone debt crisis weighs on the region's economy.

Market players will also be looking at what the central bank says about its buying of southern European and Irish bonds given that the ECB is internally divided over the program.

"If Trichet makes cautious remarks on bond buying, Italian and Spanish spreads could rise again and hurt investor sentiment," said Junya Tanase, chief strategist at JPMorgan Chase.

The bank's chief, Jean-Claude Trichet, will hold a news conference at 1230 GMT.

Constant difficulty in getting all 17 member countries to agree on policies, including whether to take collateral from Greece for aid, has even given rise to concerns among some market players that the euro zone may eventually need to break up.

Fuelling such speculation, the Dutch government, increasingly critical over euro zone bailouts, said on Wednesday it wants countries which break the budget rules to be given the option to leave the single currency area.

The euro shed 0.3 percent in Asia to trade at $1.4058, down about a full cent from a high hit on relief after a German court did not block the country's involvement in eurozone bailouts on Wednesday.

Major resistance for the euro is seen at around $1.4200, the 38.2 retracement of its fall from late August to early September.

But the currency is still holding above a seven-week low of $1.3972 hit on Monday, having managed to recover above its 200-day moving average around $1.4015.

The euro slipped 0.1 percent to 1.2075 franc but stayed above the minimum exchange rate the Swiss central bank imposed on Monday.

"The euro is being supported by the possibility that the market's focus will shift back to the dollar later today," said Ayako Sera, a market strategist at Sumitomo Trust Bank.

Many market players expect the U.S. central bank chief to drop more hints that the Fed will adopt further easing steps in his speech due at 1730 GMT, hampering the dollar.

Traders also noted that initial excitement over U.S. President Barack Obama's plan to propose new job measures, due also later on Thursday, has begun to wear off amid doubts over how much Washington will be able to spend after the acrimonious debt ceiling saga in Congress just over a month ago.

Against the yen, the greenback stood at 77.31 yen and is seen stuck around that level as selling from Japanese exporters is seen capping the pair, likely below 77.50 yen in Thursday' Asian trade. Wariness about Japanese intervention is also supporting the dollar.

The Australian dollar fell 0.6 percent to $1.0595, after Australian employment unexpectedly fell in August while the jobless rate ticked up to a 10-month high.

The disappointing report prompted the Australian money market futures to price in rate cuts of nearly 0.75 percentage points by the end of the year, even though the country's economy had seen robust growth so far thanks to strong demand for raw materials from China.

In Europe, the Bank of England also holds a rate meeting, though it is expected to hold fire as inflation is stubbornly high despite a faltering recovery in the UK economy.