FOREX-Euro advances on better money market conditions, China data
* Euro hits six-week highs vs dollar, five-year peak on yen * Euro supported by higher money market rates in euro zone * Dollar falls to 1-1/2-month low vs Swiss franc * Fed officials address taper talk ahead of meeting By Gertrude Chavez-Dreyfuss and Daniel Bases NEW YORK, Dec 9 (Reuters) - The euro hit a six-week high versus the dollar and a five-year peak against the yen on Monday, helped by tighter money market conditions in the euro zone and strong trade numbers from China, which boosted investor tolerance for riskier currencies. Europe's common currency remained resilient despite Friday's better-than-expected U.S. nonfarm payrolls report, tepid economic conditions in the euro zone and constant reiteration by European monetary officials that interest rates would remain low for some time. The euro is within striking distance of its year highs reached in late October when the currency hit $1.3832. Over the weekend, China reported its exports came in well above forecast in November, rising 12.7 percent from a year earlier, while imports rose 5.3 percent. "The strong labor data out of the U.S. and the robust trade balance numbers from China suggest that global growth may be better than the consensus view," said Boris Schlossberg, managing director of FX strategy at BK Asset Management in New York. "Under that scenario, both the U.S. and China could act as locomotives for global GDP expansion and help lift the euro zone out of its funk." The euro traded at $1.3739, up 0.26 percent, having been as high as $1.3745. Short-term interest rates in the euro zone money market edged up with the chances of more easing by the European Central Bank looking slim for now, underpinning the euro. The euro peaked at 141.93 yen, a five-year high, up 0.62 percent on the day. Investors kept the euro near its highs, ignoring a drop in euro zone sentiment and a fall in German industrial output. Since Friday's U.S. labor market report, investors have been selling the dollar and yen, according to CitiFX's flows report. The bank's clients have been buying the euro, with Citi expecting more demand from hedge funds. The euro's strength pushed the dollar index to a six week low of 80.121. It traded off 0.22 percent at 80.140 in afternoon New York trade on Monday. The dollar fell to a 1-1/2-month low against the safe-haven Swiss franc. The greenback rose 0.39 percent to 103.28 yen, building on Friday's 1.1 percent rally, and now sits just below a six-month peak of 103.38 hit on Tuesday. The dollar tracked lower U.S. Treasury yields, which failed to get traction from the U.S. payrolls number. U.S. employers hired more workers than expected in November, driving the jobless rate to a five-year low of 7.0 percent. But the jobs number was not robust enough to lead markets to price in an immediate withdrawal of monetary stimulus by the Federal Reserve. As a result, U.S. Treasury yields fell, dragging the dollar down. Still, Camilla Sutton, chief currency strategist at ScotiaBank in Toronto, said the overall U.S. economic environment suggests that tapering is likely to happen in January. "The Fed will work hard to push out expectations for higher rates as it tapers and there is a risk of a decision to lower the unemployment threshold," said Sutton. "In this environment we would expect the U.S. dollar to be broadly stronger." A Reuters poll showed Wall Street firms expect the Fed to start reducing its massive bond-buying program no later than March, though only a handful of firms expect action as early as next week. FED SPEAKERS St. Louis Fed President James Bullard said Monday the Fed could slightly reduce its monthly bond purchases this month in reaction to signs of an improved labor market. Dallas Federal Reserve Bank President Richard Fisher said the U.S. central bank should start to trim its massive bond-buying program next week. Richmond Fed President Jeffrey Lacker said further monetary stimulus is unlikely to do much to help the U.S. economy and the risks of pressing ahead with the policy outweigh the benefits. Of those three, only Bullard is a voting member of the policy-setting Federal Open Market Committee this year. He recently said a strong payrolls number would raise the chance of tapering in December. "With the meeting now a week away, after the September experience where the seeming guidance going into the meeting turned out to have led the market somewhat astray, I think there is some cautiousness about attaching too much significance to what some of these comments might mean for the policy outcome next week," said Bob Lynch, currency strategist at HSBC in New York.