Dollar hits six-week lows, euro zone periphery in vogue

Mon Feb 17, 2014 10:43am EST
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By Carolyn Cohn

LONDON (Reuters) - The dollar hit 6-week lows on Monday as recent weak U.S. data cast doubt on the pace of monetary tightening, while prospects for a new reforming government in Italy and better euro zone growth boosted the bloc's periphery.

World stocks .MIWD00000PUS rose to 3-1/2 week highs, helped by encouraging news on Chinese lending, but volumes were thin due to a U.S. market holiday.

A run of weak U.S. data, including an unexpected fall in January manufacturing output on Friday, has caused some investors to revise their expectations of how fast the Federal Reserve will scale back stimulus and tighten monetary policy.

"There's been a very patchy data outlook for the past six weeks to two months and expectations of a rate rise from the Fed have been curtailed," said Peter Kinsella, strategist with Commerzbank in London.

Higher-yielding emerging markets .MSCIEF, which have suffered as U.S. investors bring their money home in anticipation of tapering, also rose to 3-1/2 week highs.

Data at the weekend showed Chinese banks disbursed the highest volume of loans in any month in four years in January, a surge that suggests the world's second-biggest economy may not be cooling as much as some fear.

The dollar hit a six-week low .DXY against a basket of currencies and three-week lows against the euro following recent upbeat euro zone economic readings. It edged off those lows by 1500 GMT, to 80.149 and $1.3704 per euro.

It rose against the yen after data showed Japan's economy grew just 0.3 percent in the fourth quarter, confounding forecasts of a 0.7 percent gain.   Continued...

An office worker walks past the board of the Australian Securities Exchange building displaying its logo in central Sydney April 5, 2013. REUTERS/Daniel Munoz