* Euro zone inflation surprise drives euro higher
* U.S. revised GDP data hurts dollar
* Dollar rebounds against ruble
By Sam Forgione
NEW YORK, Feb 28 The dollar fell to a two-month
low against the euro on Friday, posting its worst monthly
performance since April after data showed steady euro zone
inflation and a downward revision to fourth-quarter U.S.
The European Union's statistics office Eurostat estimated
that consumer prices in the 18 countries sharing the euro rose
0.8 percent year on year this month, a sign of stability that
cooled expectations the European Central Bank might ease
monetary policy as early as next week.
"Everyone's probably re-adjusting their expectations as to
how aggressive the ECB will be with respect to its monetary
accommodation," said Mark Frey, chief market strategist at
Cambridge Mercantile Group in Victoria, British Columbia.
The U.S. Commerce Department, meanwhile, said on Friday
gross domestic product expanded at a 2.4 percent annual rate in
the fourth quarter, down sharply from the 3.2 percent pace of
growth reported last month and the 4.1 percent expansion logged
in the third quarter.
The data stoked fears the Federal Reserve could pause cuts
to its monthly bond-buying program, which analysts said would
hurt the dollar since it would help keep interest rates low and
drive capital flows into higher-yielding assets outside the
"If we saw further weakness in the data such as what we've
seen today, the Fed could slow the pace of removing their
monetary accommodation," Frey of Cambridge Mercantile said.
The euro hit a session high of $1.3824 against the
dollar, marking its highest level since late December. It last
traded up 0.7 percent at $1.3807. The currency posted its best
month against the dollar since April, notching gains of 2.4
The dollar index, which tracks the U.S. currency's
performance against a basket of major currencies, was last down
0.7 percent at 79.763. The index posted its worst monthly
performance since September amid uncertainty surrounding the
pace of the Fed's withdrawal of its asset purchases.
Data from the Commodity Futures Trading Commission on Friday
showed speculators reduced bets on the U.S. dollar in the latest
week, with net longs falling to their lowest in nearly four
The dollar was also last down 0.3 percent against the yen
to trade at 101.84 yen.
The yen was seen as investors' best choice for a safe haven
on concerns over a weakening Chinese yuan and tensions in
DOLLAR RECOVERS AGAINST RUBLE
The dollar recovered losses against the ruble and
last traded up 0.11 percent against the Russian currency at
36.045 to the dollar, ending a relief rally that saw the ruble
gain versus the dollar after it hit a five-year low on Feb. 26
amid protests in Ukraine.
While the ruble fell modestly against the dollar, Ukraine's
hryvnia held its gains. The dollar was last down 7.62
percent at 9.7 hryvnia, marking a rebound in the Ukrainian
currency after it hit a record low against the dollar on
Thursday at 10.6 hryvnia.
The recovery in the hryvnia occurred despite ongoing
geopolitical tensions in Russia and Ukraine. Armed men took
control of two airports in Ukraine's Crimea region on Friday in
what Ukraine's new leadership described as an invasion and
occupation by Moscow's forces.
The yuan recovered some ground in European trade, but
still lost 0.87 percent for the week against the dollar, its
biggest weekly loss on record.
Most western bank analysts are agreed that the moves by the
People's Bank of China are aimed at squeezing out some of the
speculative money that has banked on the yuan's steady rise
against the dollar over the past decade.
"There is some speculation about introducing this volatility
to limit some of the inflows," said Eric Viloria, currency
strategist at Wells Fargo Securities in New York.