The euro kept close to a 17-month high against the dollar and stock markets hugged recent levels on Thursday as investors waited for the European Central Bank to give hints on future interest rate rises.

Equity markets were also pausing from recent losses amid signs that long-term investors are becoming more cautious about economic growth.

Eyes were also on commodity markets with copper hitting a seven-week low and silver extending losses that have reached nearly 20 percent this week.

For many, though, Thursday was a case of listening for the magic words -- waiting to see if ECB President Jean-Claude Trichet will point to a rate rise in June by mentioning strong vigilance in a news conference later in the session.

The ECB lifted interest rates in April, not only signaling the launch of an anti-inflation program but creating expectations of rate differentials between the bank and other authorities, notably the U.S. Federal Reserve.

No change in euro zone rates is expected on Thursday.#

The higher yields available in the euro zone and elsewhere such as Australia have weakened the dollar.

It was down 0.2 percent against a basket of major currencies

on Thursday, while the euro was trading up around $1.48.

Traders said that if Trichet repeats the strong vigilance phrase, the euro would push back above $1.49. But even if he leaves it out, the currency is not seen likely to fall much from current levels given the existing rate differences.

Currency specialists FxPro said in a note that the euro zone was thriving despite intense pressures.

A possible Greek debt restructure, a Portuguese bailout, a sharp decline in Spanish house prices, a Finnish electoral revolt against bailouts -- all have been essentially ignored by the single currency, it said.

The firm said it was all down to interest rates, German economic strength and increasing demands from Asia FX reserve managers for something other than the brittle dollar.


World stocks edged slightly higher after recent losses, helped by Europe.

The FTSEurofirst 300 was up 0.2 percent after falling 1.4 percent on Wednesday, hurt by weak U.S. economic data, concern over China's growth outlook and forecast-lagging company earnings.

Yesterday's falls were quite sharp and I expect today there will be bottom fishing, said Colin McLean, managing director at fund firm SVM in Edinburgh.

Data on Wednesday showed weaker U.S. private hiring than expected in April and a sharper cooling of U.S. service sector growth.

Euro zone government bond yields were slightly higher ahead of the ECB meeting and Trichet's news conference.

(Additional reporting by Ian Chua, Eric Burroughs and Joanne Frearson; Editing by John Stonestreet)