FOREX-Dollar gains broadly on dour global economic data

* Weak global data fans risk aversion
* Euro posts worst daily performance since March
* Spanish borrowing costs hit new highs at auction
* Dollar hits 5-week high vs yen

By Gertrude Chavez-Dreyfuss
NEW YORK, June 21 (Reuters) - The U.S. dollar rose across
the board on Thursday as weak economic data from the United
States, Europe and China spurred investors to flee riskier
currencies and seek shelter in the greenback.
U.S. jobless claims indicated the labor market is still
struggling, while signs of softening in U.S. manufacturing and
weakness in global output heightened the aversion to risk.

The reports reinforced the impression that the Federal
Reserve did not act aggressively enough on Wednesday.
"We've come back to the situation where the data was weak
and concerning and we have anti-risk sentiment going on, which
tends to benefit the dollar," said Tom Fitzpatrick, chief
technical strategist at Citigroup.
"In addition, nothing has really been done in Europe to
solve the debt crisis, and as a result the underlying dynamic
has not really changed. Therefore, we should continue to expect
the dollar to outperform other currencies."
The euro came under fresh pressure after data showed
Germany's private sector shrank in June for the second month
running, with manufacturing activity hitting a three-year low.
The euro posted its largest daily loss against the dollar in
more than three months.
The data from Germany, Europe's largest economy, suggested
the country may contract in the second quarter as the euro zone
debt crisis intensified, and offset data from France that showed
a slowdown in business activity there had eased.
Overall, the weak euro zone data kept alive speculation the
European Central Bank will cut interest rates, offering
investors a fresh excuse to sell the euro.
The euro dropped as low as $1.2571, far off
Wednesday's high of $1.2744. By midday, the euro was at $1.2574,
down 1 percent on the day.
The euro's intraday bias, however, remained neutral,
ActionForex analysts said. The rebound from a nearly two-year
low of $1.2287 hit in early June was viewed as a correction, and
with $1.2435 minor support intact, a further rally could still
be seen, they added.

POSITIONING FOR THE FED
The dollar index, a measure of the greenback's
performance against a basket of currencies, rose 0.7 percent to
82.154. Even so, analysts said the dollar's outlook was clouded,
with more players likely to position for fresh Fed stimulus
after the central bank downgraded its U.S. growth forecast.
The Fed on Wednesday expanded its "Operation Twist" program,
under which the U.S. central bank sells short-term securities to
buy longer-term ones to keep long-term borrowing costs down, by
$267 billion. The program, which was due to expire this month,
will run until the end of the year.
Some analysts said the Fed was probably saving ammunition
given the risk the euro zone crisis could deteriorate in coming
weeks as borrowing costs in peripheral countries remain high.
Spain's borrowing hit a euro-era high at an auction on
Thursday. The country's government officials said a formal
request for bank support will be made in the next few days and
the details finalized before the end of July.
.
A Reuters poll done after the Fed decision showed that Wall
Street firms still see a 50 percent chance of another round of
quantitative easing.
Against the yen, the dollar hit a five-week high at 80.32
yen, its highest level since mid-May. It was last at
80.22, up 0.9 percent on the day. The euro slipped against the
yen to 100.90.
One possible factor for the yen's weakness was the approval
by Japan's lower house of two dovish nominees to the Bank of
Japan policy board.
Scotia Capital currency strategist Eric Theoret said the
nominees are known to favor further easing to support the
Japanese economy. That could mean an expansion in the BoJ's
asset purchase program over the coming months, likely to be
announced at the next meeting, on July 12.
Growth-linked currencies came under pressure against the
U.S. dollar, digesting the Fed decision and weak Chinese data.
The Australian dollar fell 1.0 percent to US$1.0086,
retreating from a seven-week high of $1.0225 hit on Wednesday.
The Aussie dollar hit an intraday low after a private-sector
survey showed China's factory sector contracted for an eighth
successive month in June, with export orders at their weakest
since early 2009.