* Euro rises after data on euro zone current account surplus
* Markets seek more clarity on Fed policy
* Crimea tensions drive up safe-haven yen, Swiss franc
(Recasts; adds New York trades, quotes; changes byline;
dateline previously LONDON)
By Michael Connor
NEW YORK, March 21 The dollar's three-day rally
sputtered on Friday as the euro rose against the greenback on
after data showed a record euro zone current account surplus in
The dollar, whose gains accelerated on Wednesday after the
chair of the Federal Reserve hinted that U.S. interest rates may
rise sooner than anticipated, eased against other major
The U.S. dollar index, which measures the dollar
against six major currencies, declined by 0.08 percent to
80.124, a day after touching a three-week high of 80.354.
The euro, which earlier this week had been trading just shy
of $1.40, was up 0.22 percent to $1.3809. The shared currency
struck a two-week low of $1.3749 on Thursday.
The speculation that the United States may accelerate the
end of ultra-low interest rates had obscured the international
trade flows and other economic fundamentals that favor the euro
over the dollar, said Michael Woolfolk, senior market strategist
at Bank of New York Mellon in New York.
"It's a return to the mean," Woolfolk said. "What we are
seeing is a return to where the euro wants to be: above the
The euro was also helped by capital inflows.
With the European Central Bank showing little inclination to
ease monetary policy soon, analysts said inflows into
rate-sensitive money markets are likely to continue alongside
robust demand for European stocks and peripheral euro zone
Comments by Fed Chair Janet Yellen that had prompted markets
to price in a U.S. rate hike early next year came under renewed
scrutiny on Friday.
"There is a reassessment of Fed rate hike expectations that
is taking place which is keeping the dollar pegged back," said
Manuel Oliveri, FX strategist at Credit Agricole.
"The euro, on the other hand, is being supported by inflows
into European stocks, and together with the current account
situation, we should see a bit of upside in the euro," he said.
Data from the ECB on Friday showed the euro zone's current
account surplus hit a record level in January, when portfolio
investments rose to 16.9 billion euros.
"Investors are awaiting for further confirmation from the
Fed on its rate path especially if U.S. data in the second
quarter starts to look up," said Geoffrey Yu, currency
strategist at UBS. "For us, the dollar is a buy on dips."
Fed officials, including Richard Fisher, James Bullard and
Narayana Kocherlakota, are due to speak later on Friday and
could offer more guidance on the U.S. central bank's thinking.
CRIMEA TENSIONS SUPPORT YEN, SWISS FRANC
The safe-haven yen and Swiss franc outperformed as traders
grew cautious going into the weekend amid rising tension between
Russia and the West following Moscow's annexation of Crimea.
Russian stocks fell sharply as investors digested the impact of
U.S sanctions over the crisis in Ukraine.
EU leaders meeting in Brussels are also mulling wider
The dollar fell 0.12 percent against the yen to 102.27 after
topping out at 102.69 on Wednesday. The dollar was lower
against the Swiss franc at 0.8819 francs.
Meanwhile, the Chinese yuan steadied after hitting a
13-month low with traders saying there were signs that the
currency may be finding a base.
The yuan has shed more than 1.2 percent so far this week, a
record weekly loss, after the central bank last weekend doubled
the currency's permitted trading range to 2 percent either side
of the fixing.
Many saw this as a signal of official comfort with the
currency's recent losses, with the central bank keen to shake
out hot money from the market.
(Additional reporting by Anirban Nag in London; Editing by