* Tumbling Treasuries yields wipe out dollar's initial gains
* Wall Street losses, risk aversion also hurt greenback
* Euro hits 11-week lows versus dollar, yen earlier
* Euro zone growth misses forecasts, inflation subdued
(Updates market action, adds quote)
By Richard Leong
NEW YORK, May 15 The dollar fell on Thursday
with declining U.S. yields on some downbeat economic news, while
the euro tumbled to 11-week lows against the yen and greenback.
The fall in the euro was due to muted euro zone growth and
inflation data that supported bets the European Central Bank
will ease monetary policy at its meeting in June.
Benchmark Treasuries yields fell below 2.50 percent to their
lowest levels since October in the wake of news that U.S.
factory output fell at its steepest rate in over 1-1/2 years in
April and a surprise drop in a gauge of U.S. home builder
sentiment. These reports overshadowed encouraging data on
regional factory and jobless claims.
"Yields just collapsed around that time and the dollar is
basically reacting to that," said Shaun Osborne, chief foreign
exchange strategist at TD Securities in Toronto.
A sell-off in Wall Street stocks also hurt the dollar. The
Standard & Poor's 500 index shed 1 percent.
Benchmark 10-year Treasuries yields were last
down 4 basis points on the day to 2.502 percent.
The dollar was 0.33 percent weaker against the yen at 101.53
yen after hitting a session low of 101.30 yen, which was
its lowest in two months.
The greenback gave up its earlier gain against the euro. It
reached its strongest versus the shared currency since Feb. 27
earlier. It was little changed versus the euro at $1.3715
but has come back from a 2-1/2 year low of $1.3995 last
The euro remained in negative territory against the yen in
late New York trading. It was last down 0.34 percent at 139.19
yen after touching 139.02 yen, its lowest in 11
The euro rose to a six-week high against the Swiss franc
on speculation the Swiss National Bank might lift the
floor on the euro/Swiss franc pair to 1.25 francs or perhaps
even 1.30 in response to expected policy from the ECB. The SNB
did not comment.
The euro zone economy expanded only 0.2 percent in the first
quarter rather than the 0.4 percent expected by economists, the
EU's statistics office estimated.
Reuters on Wednesday quoted sources as saying the ECB is
preparing a package of policy options for its June meeting. They
include cuts in all its interest rates, plus measures aimed at
boosting lending to small and mid-sized firms.
ECB Executive Board member Yves Mersch said on Thursday that
the central bank's toolbox included a negative rate on bank
deposits and other measures.
(Additional reporting by Anirban Nag in London; Shinichi
Saoshiro in Tokyo; Editing by Larry King, John Stonestreet,
Chizu Nomiyama and Lisa Shumaker)