Dollar slips ahead of central bank meetings

TOKYO, May 8 (Reuters) The dollar edged lower against other major currencies on Tuesday ahead of three central bank meetings that could underscore market expectations for U.S. interest rates to fall this year as rates in other major economies rise.

Worries about slower U.S. growth at a time when other major economies are expected to post relatively solid growth were likely to keep the dollar under pressure, analysts said.

The Australian dollar was the biggest gainer as strong consumer spending data boosted growth across the economy and kept upward pressure on inflation and interest rates.

While the Federal Reserve is seen holding benchmark short-term rates at 5.25 percent after its meeting on Wednesday, analysts say officials may mention signs of slower U.S. growth after recent data revealed anaemic job growth in April, which would weigh on the dollar.

''The market will focus on the Fed's outlook on the U.S. economy, which is very unclear at this point,'' said Kengo Suzuki, a currency strategist at Shinko Securities.

''Given the soft jobs data last week, the market may react to sell the dollar further if the Fed implies concern about a slowing economy,'' Suzuki said.

The euro rose slightly to $1.3615 as of 0516 GMT, edging near a lifetime high of $1.3683 hit in late April.

The European Central Bank is expected to hold rates steady at 3.75 percent on Thursday but to signal a hike in June.

Traders said sanguine comments about the euro's strength by European finance ministers on Monday and the currency's advantage of a higher interest rate outlook encouraged them to hold long positions.

Against the yen, the euro was quoted at 163.12 yen hovering in sight of a record high of 163.60 yen hit last week.

The dollar fell 0.2 percent to 119.80 yen U.S. RETAIL SALES Besides the Fed's policy meeting, U.S. retail sales data due on Friday could also be key for the dollar's outlook.

''The market is expecting an increase for April. But the actual outcome could be weaker than expected considering the softness in the employment environment,'' said Masaki Fukui, a senior market economist at Mizuho Corporate Bank.

U.S. retail sales likely rose 0.4 percent in April, according to the median forecast in a Reuters survey, after a 0.7 percent increase in March.

Sterling edged higher to $1.9959 ahead of a rate decision on Thursday by the Bank of England, which is expected to lift rates to 5.5 percent, a move that would put British interest rates above those in the United States.

The Australian dollar rose nearly 0.7 percent to $0.8305 after stronger-than-expected Australian retail sales data prompted traders to buy back the currency.

The Aussie had fallen to a four-week low of $0.8170 last Friday after the Reserve Bank of Australia cut its 2007 inflation forecast, suggesting rates will remain at 6.25 percent for the rest of the year.

But a surprisingly strong 1.1 percent rise in March retail sales provided a solid base for economic growth in the first quarter and led investors to expect further growth.

The Canadian dollar was steady at C$1.1013 after hitting an 11-month high against the U.S. dollar of C$1.1007 on Monday on news of a $27 billion bid for Canadian aluminium maker Alcan Inc.

REUTERS SI DB1230