* Dollar index wallows after disappointing consumer
spending, jobless claims
* Euro brushes off news of Italy PM's resignation, looks to
* Aussie pokes above 90 U.S. cents after China inflation
By Ian Chua
SYDNEY, Feb 14 The U.S. dollar was pinned at
three-week lows against a basket of major currencies on Friday
after disappointingly soft U.S. data dealt a blow to the already
The Euro brushed off news that Italy's prime minister would
resign, instead focusing on the euro zone's GDP data due later
in the day for near term direction.
U.S. retail sales fell unexpectedly in January and more
Americans filed for jobless benefits last week, the latest signs
the world's biggest economy started the year on a softer footing
as bad weather took its toll.
The dollar index slid to a low of 80.194, reaching a
level last seen on Jan. 24. It has since crept up to 80.282.
The dollar stood at 102.08 after clawing back from
Thursday's low of 101.695, while the euro climbed to a near
three-week peak of $1.3675.
The decline by the dollar index came as U.S. Treasury yields
fell. Oddly, Wall Street recovered and closed higher as some
investors looked past the disappointing data, chalking the
weakness up to weather instead of weaker fundamentals.
The euro barely reacted to news that the Italian prime
minister will resign on Friday, opening the way for the
country's third administration in a year.
"Market players are turning a blind eye to the Italian prime
minister's resignation as recently the euro zone economy has
been spared from bearish news," said Ayako Sera, senior market
economist at Sumitomo Mitsui Trust.
"But the market will react quickly once the euro zone
economy starts showing signs of weakness," Sera said.
Investors will have a chance to gauge the health of the euro
zone economy through the fourth quarter growth data later in the
day. Analysts polled by Reuters expect slightly faster growth in
the euro zone economy.
"After ECB President (Mario) Draghi specifically pointed to
Q4 GDP as a key piece of incoming evidence on the economy, the
report should be watched closely today," analysts at BNP Paribas
wrote in a note to clients.
Last week, Draghi put markets on alert for possible policy
action in March.
Any positive news on growth, however, is still likely to be
offset by persistently low inflation, which will be key for
further ECB easing and a weaker euro, BNP analysts said.
The standout currency overnight was sterling which climbed
to its highest in nearly three years against the greenback. It
hit $1.6675, taking total gains this week to more than
The soft U.S. data stood in stark contrast with the Bank of
England's much more upbeat outlook for the British economy which
helped lift the pound this week.
The Australian dollar was in focus after it dropped one full
U.S. cent on Thursday in the wake of surprisingly weak labour
It touched a low of $0.8928 before clawing back
half its losses, nudging above 90 U.S. cents following data out
of China that showed consumer prices rose 2.5 percent in
January, broadly in line with expectations.
China is Australia's main export market and the Aussie is
often used as a liquid proxy for China plays.