The ECB's meeting is the first since the joint intervention with the other Group of Seven nations to prop up the euro on September 22.

There was some speculation that the ECB might try to reinforce its strong euro message by hiking rates, traders said. In a Reuters survey, 34 out of 48 economists predicted no rate rise this week, although a sizeable minority of 10 did expect a move.

"The market is not looking for a rate hike today, but what will be more important are the comments from the ECB officials at the press conference after the rate decision," said Mr Jesper Dannesboe, chief currency strategist at Dresdner Kleinwort Benson in London. "The main support for the euro is coming from intervention fears and the key level on the downside is $0.8660."

The euro was hovering near the day's highs around $0.8760, about half a cent above Thursday's one week-lows around $0.8715. Against the yen, it was steady around 95.50/60 yen.

"There is an argument this time would be different because of the intervention. That a hike would be taken as a true sign of intent," said a US bank dealer in Tokyo. "On the other hand, a lot of the data recently - like French confidence yesterday - point to slowing growth, so a tightening could be seen as overkill for the economy."

Traders said some positive news looked forthcoming from Germany where newspaper leaks suggested unemployment would show a huge fall of more than 95,000 adjusted in September, well beyond anything analysts had expected.

Political sources said that seasonally unadjusted German unemployment fell in September to 3.685 million from 3.781 million in August. The unemployment rate fell to 9.0 per cent from 9.3 per cent, the sources said. "As long as there is a drop in seasonally adjusted terms, it will no have an impact on euro/dollar because the market is expecting a drop," said Mr Dannesboe at Dresdner.

Furthermore, there was fresh confirmation on Wednesday the G7 bought $5-6 billion worth of euros between them when they intervened last month. This was toward the high end of initial estimates and was taken by some as a sign of their serious intent.

But the euro bears were unimpressed, noting the Bank of Japan on one day in April spent $13 billion restraining the yen.They also argued G7 intervention was small beer compared with capital flows. Meanwhile, the dollar was pinned within half a yen of Wednesday's seven-week highs around 109.45 yen. The yen was earlier undermined by data showing that spending by Japanese households fell a steep 4.1 per cent year-on-year in August.

(Reuters)