* Dollar falls after data dents growth optimism
* U.S. consumer sentiment tumbles, inflation not yet a
* Sterling rallies on BOE's King comments, yen at 1-week
By Wanfeng Zhou
NEW YORK, March 15 The dollar fell from a
seven-month high against a basket of currencies on Friday after
U.S. data dented optimism about the economy and reinforced
expectations the Federal Reserve will continue its bond-buying
program for the foreseeable future.
Strong gains in other currencies added to pressure on the
dollar. Sterling jumped after the Bank of England's governor
suggested he did not want the British pound to fall any further.
The euro gained on the prospect of EU leaders looking at
short-term ways of boosting faltering euro zone economies.
U.S. consumer sentiment tumbled to its lowest since December
2011 in early March, while manufacturing activity in New York
cooled slightly. Separate data showed U.S. consumer prices rose
in February as the cost of gasoline surged, but there was little
sign of a broad pickup in inflation.
"It looks like we still have some scope to continue with
QE," said Andrew Dilz, foreign currency trader at Tempus
Consulting in Washington, referring to the Fed's bond-buying, or
quantitative easing program.
The Fed meets next week and looks set to keep buying $85
billion a month in mortgage and Treasury bonds in an effort to
encourage investment and bolster a weak economic recovery
. The program is aimed at keeping long-term
interest rates low, eroding the dollar's yield appeal.
The dollar index, which tracks the greenback versus a basket
of currencies, fell 0.6 percent to 82.139. It had risen
to 83.166 on Thursday, the highest since early August, buoyed by
positive data on U.S. employment and consumer spending released
over the past week.
Lately, the dollar has benefited from good news on the
economy as expectations U.S. growth is outperforming other major
countries have lured foreigners into U.S. assets.
In previous years, the dollar would typically weaken on good
data as investors sold the low-yielding U.S. currency in favor
of emerging market stocks and commodities.
The euro rose 0.4 percent to $1.3058, having hit a
session high of $1.3107 on Reuters data and recovering from
Thursday's three-month low of $1.2910.
Traders said the euro's failure to break below $1.29
encouraged profit-taking on dollar gains. Strong chart support
is at the 200-day moving average at $1.2869.
Arne Lohmann Rasmussen, head of FX research at Dankse Bank
in Copenhagen, said the euro could recover further towards $1.32
in coming weeks. Danske Bank forecast it to rise to $1.35 in
three to six months but believe this will mark its peak.
Concerns about Italy could pressure the euro as the
country's parliament convenes for the first time since last
month's inconclusive election, with parties still deadlocked
over how to form a government.
Investors would prefer Italy avoided new elections, a survey
by Morgan Stanley showed, concerned they would just postpone
economic reform and bring little hope of resolving a
parliamentary deadlock. Stress began to show in Italy's bond
The dollar fell 0.9 percent to 95.29 yen, with the
Japanese currency helped by short-covering after a decline of 10
percent this year. The dollar earlier fell to 95.06 yen, a
Japan's parliament approved Prime Minister Shinzo Abe's
nominee for central bank governor, Haruhiko Kuroda, and nominees
for the two deputy governor posts, clearing the way for the
radical monetary easing.
Kuroda's pledge to "act with speed" and do whatever it takes
to hit the BOJ's new inflation target has some investors
speculating he may summon a meeting even before the next
scheduled policy review on April 3-4.
Sterling rose 0.3 percent to $1.5118. BoE chief
Mervyn King said its decline had gone far enough, although
traders did not expect the pound's rise to last long given
concerns about the UK economy and speculation of more monetary