* Yen slips to 7-month low against buoyant dollar
* Dollar index extends gains, approaches one-year peak
* Euro zone inflation data key this week
By Lisa Twaronite and Ian Chua
TOKYO/SYDNEY, Aug 25 The euro fell to its lowest
in nearly a year against a broadly firmer dollar on Monday after
comments from the head of the European Central Bank raised
prospects of more policy easing as early as next week.
The common currency skidded to $1.3185 in early
trade, its lowest since September 2013, from around $1.3246 late
in New York on Friday. It was last at $1.3204, down about 0.3
percent on the day.
That helped lift the dollar index up about 0.2
percent to 82.528, heading towards its Sept. 5 peak of 82.671. A
break above that would take it to levels not seen since July
In a stronger language than he has used in the past, ECB
President Mario Draghi on Friday confirmed the central bank is
prepared to respond with all its "available" tools should
inflation drop further.
"Even more significantly, Draghi departed from the script
originally published on the ECB's website on delivery, adding a
section on inflation expectations during August," said Ray
Attrill, global co-head of FX strategy at National Australia
"He noted a decline in short, medium and longer term
inflation expectations and indicated this would be acknowledged
at the Sept meeting. So it looks like more easing ahead."
The ECB holds its next policy review on Sept 4.
Ahead of that, investors will scan euro zone inflation data
due on Friday. Analysts polled by Reuters expect annual
inflation to have slowed to 0.3 percent in August from 0.4
percent in July. That is well below the ECB's danger zone of 1.0
percent and its target of just under 2.0 percent.
In contrast, Federal Reserve Chair Janet Yellen on Friday
gave a nod to the concerns of some Fed officials about the
sustained level of monetary policy stimulus, even as she
stressed the need to move cautiously on raising rates.
"Some people expected more dovish comments from Yellen, but
it wasn't a big change," said Kaneo Ogino, director at
Global-info Co in Tokyo, a foreign exchange research firm.
As a result, Fed funds futures fell back <0#FF:> as the
market priced in the risk of an earlier move on rates. Yields on
two-year Treasury paper climbed over 8 basis points
for the week, the largest such rise since June last year, while
the yield curve flattened markedly.
That helped the dollar outperform, rising to a seven-month
high against the yen at 104.49 on Monday morning before
pulling back slightly to stand at 104.24 yen, still up 0.3
percent on the day.
The New Zealand dollar plumbed a six-month low of $0.8336
and was last down 0.6 percent at $0.8349.
Even before its latest jump, the dollar had increasingly
attracted bulls. Speculators boosted bullish bets on the
greenback in the latest week to their highest in more than two
years, according to data from the Commodity Futures Trading
Commission released on Friday.
The CFTC said the net dollar long position soared to $30.40
billion in the week ended Aug. 19, from $27 billion the previous
week. That was the highest net long in the U.S. dollar since
A bank holiday in Britain could mean thinner trading ahead
in the European session.
(Editing by Shri Navaratnam and Eric Meijer)