FOREX-Dollar slips on weak U.S. data, Iraq violence

Thu Jun 12, 2014 4:21pm EDT

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(Updates prices, analyst comments)

* Dollar falls broadly after weak U.S. data; Iraq violence weighs

* Yen gains ahead of Bank of Japan meeting

* Kiwi jumps after RBNZ raises rates, keeps hawkish bias

By Sam Forgione

NEW YORK, June 12 (Reuters) - The dollar slipped for a second straight session against a basket of currencies on Thursday after U.S. retail sales and weekly jobless claims data showed weakness in the economy and curbed speculation of a hawkish stance from the Federal Reserve.

The Commerce Department said retail sales gained 0.3 percent last month, missing expectations for a 0.6 percent rise. April's retail sales, however, were revised to show a 0.5 percent increase.

"The retail sales data was a bit concerning for people anticipating stronger growth, and if you're not going to get stronger growth, that brings down the expectations for higher Fed rates," said Joseph Trevisani, chief market strategist at WorldWideMarkets in Woodcliff Lake, New Jersey.

The Fed's upcoming monetary policy meeting is next week.

In a separate report, the Labor Department said initial claims for state unemployment benefits climbed 4,000 to a seasonally adjusted 317,000 for the week ended June 7, exceeding expectations.

The dollar fell against the euro for the first time in five trading sessions, although the euro was not far from a four-month low of $1.3503 hit last week after the European Central Bank cut rates to record lows.

A drop in U.S. Treasuries yields narrowed the gap between yields on U.S. Treasuries and German bunds, leading traders to take profits on the dollar's rally against the euro, said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.

The dollar also fell on worries that violence in Iraq would disrupt oil supplies. Traders said violence in the second-largest OPEC producer raised concerns of larger geopolitical conflict and a sustained period of higher oil prices.

"This could potentially signal a broader destabilization in the region," said Esiner, who added that the impact of higher oil prices could hurt U.S. consumer spending.

The dollar fell against the yen, which has advanced in recent sessions after strong economic data reduced expectations for further Bank of Japan monetary easing. The central bank's latest two-day policy meeting starts Thursday.

The New Zealand dollar, meanwhile, rallied after the Reserve Bank of New Zealand hiked base rates by 25 basis points to 3.25 percent, drawing demand for the higher-yielding currency.

The U.S. dollar index, which measures the dollar against a basket of six major currencies, was last down 0.28 percent at 80.565. The euro was last up 0.18 percent against the dollar at $1.3554.

The dollar was last down 0.43 percent against the Japanese yen at 101.63 yen, and was last down 0.22 percent against the Swiss franc to trade at 0.8982 franc. The New Zealand dollar last traded up 1.48 percent at $0.8692.

Benchmark 10-year U.S. Treasury notes were last up 14/32 in price to yield 2.588 percent. Debt prices rallied on the weak U.S. data and a robust auction of 30-year bonds. (Reporting by Sam Forgione; Additional reporting by Patrick Graham in London; Editing by James Dalgleish)

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