* Dollar curbs gains vs euro, yen after U.S. data
* U.S. jobless claims climb in latest week
* Dallas Fed President Fisher says inflation slowdown could
* Weak euro zone inflation data adds to rate cut prospects
NEW YORK, May 16 The U.S. dollar dropped against
the euro and Japanese yen on Thursday as a deluge of data
highlighted vulnerabilities in the U.S. economy and curbed
expectations the Federal Reserve will scale back its bond-buying
program any time soon.
The dollar snapped a five-day advance against the euro after
data showed the number of Americans filing new claims for
unemployment benefits climbed last week to the fastest pace in
six months, raising concerns about government austerity
The Fed has made it clear that monetary policy will remain
accommodative until they see broad and sustained growth in jobs.
Other data showed a sharp drop in gasoline costs led U.S.
consumer prices to tumble in April by the most in over four
years. Meanwhile, ground-breaking for new U.S. homes fell more
than expected in April from an almost five-year high.
"The dollar was on an uptrend headed into today's number,
mostly due to an optimistic view of the U.S. economy," said
Vassili Serebriakov, FX strategist at BNP Paribas in New York.
"The Fed has fallen short of its mandate on jobs and
inflation, so the data highlights the need for further
accommodation," he said. "The data also warrants a
reconsideration of the bullish dollar view."
The euro was last up 0.1 percent at $1.2897, above a
six-week low of $1.2842 touched on Wednesday when data showed
the euro zone's economy contracted for a sixth consecutive
"The dollar was overstretched in valuation and positioning,
so it makes sense that we are now seeing a bit of an unwind,"
Dollar losses accelerated in midmorning North American trade
after a survey showed factory activity in the U.S. mid-Atlantic
region contracted in May as new orders fell to their lowest
level in almost a year.
Dallas Federal Reserve Bank President Richard Fisher reacted
to the U.S. inflation data.
A slowdown in U.S. inflation was benign and could "unleash"
consumer spending, Fisher said, adding that he was not worried
about the risk of deflation.
"The data today was broadly weak and overall it drives home
the fact that the economic backdrop remains uneven, and that
will keep the Fed's foot on the accelerator by continuing to
engage in accommodative policy," said Tom Porcelli, chief U.S.
economist at RBC Capital Markets in New York.
"Talk about the Fed scaling back its asset purchases is
premature, but we do expect it to happen sometime at the turn of
the year," he said.
Meanwhile, falling prices in Germany and France highlighted
the risk of deflation in the euro zone, which slipped into its
longest ever recession at the start of this year, increasing the
risk of more European Central Bank interest rate cuts.
Traders said investors were eager to buy dips in the dollar,
which was expected to gain further while the yen continued to
weaken following April's aggressive Japanese monetary easing.
Against the yen the dollar last traded down 0.1 percent at
102.16 yen, down from a session peak of 102.68 yen. The
dollar touched a peak of 102.76 yen on Wednesday, its strongest
since late 2008, according to Reuters data.
The Australian dollar remained near an 11-month low with the
session trough at US$0.9795. It was the first dip below
98 U.S. cents for the Australian dollar since June 2012, using
Traders cautioned that the U.S. initial jobless claims and
other data were not reasons to overreact, particularly ahead of
the release of the Fed policy meeting minutes from the April
30-May 1 meeting on Wednesday.
"We're all looking to the FOMC minutes next week," said
Andrew Dilz, currency trader at Tempus Inc in Washington.