* Dollar recovers after start of European trade
* Comments by Belgium's Smets rows against ECB rate hike
* ECB's Draghi, Lautenschlaeger due to speak later
By Patrick Graham
LONDON, March 13 Buying from the start of
European trade on Monday halted three days of losses for the
dollar, the impact of higher U.S. market interest rates turning
it positive on the day against both the euro and a basket
A wave of profit-taking on some of the greenback's gains of
the past fortnight has been encouraged since Thursday by signs
the European Central Bank is beginning to think more about how
to react to an improving euro zone economy.
Some ECB policymakers last week raised the possibility of
increasing interest rates before it ends its emergency asset
purchases although the discussion was isolated and did not enjoy
any broad support, sources said on Friday.
Friday's solid jobs number has still cemented the case for a
rise in U.S. Federal Reserve rates this week that will long
predate any European move and sees market rates far higher.
Belgian central banker Jan Smets also told the Wall Street
Journal that the ECB had not taken a first step toward removing
"There was also always the chance that once we got a good
payrolls number on Friday, the market would take some money off
the table and that duly occurred," said Neil Mellor, a currency
strategist with Bank of New York Mellon in London.
"But the fundamentals are still behind the dollar. A lot is
priced in but when you have a currency that is outstanding in
terms of yield, the sell off was always going to limited."
By 0840, the dollar had recovered around a third of a cent
from lows hit in Asian time to stand flat on the day at $1.0680.
The dollar index was marginally higher at 101.26.
Fed fund futures prices showed investors pricing in more
than a 90 percent chance of an increase in U.S. overnight
interest rates and the market's attention is now firmly on the
scale of tightening further out.
Money market pricing still stops short of three
quarter-point rises this year. If the Fed can continue to move
every three months, it will deliver four.
A Reuters poll of 23 primary dealers showed a dozen of them
expected the Fed to raise rates to 1.00 to 1.25 percent by its
June meeting, while 10 of them expected a rate increase by its
"Everyone wants to see the economic projections of FOMC
members, to gauge whether they will indeed stick to a path of
raising interest rates in both June and September," said Ayako
Sera, market strategist at Sumitomo Mitsui Trust Bank in Tokyo.
(Editing by Robin Pomeroy)