August 28, 2017 / 3:05 PM / a year ago

FOREX-Dollar extends drop in wake of Yellen, Draghi comments

(Updates prices, adds comments; changes byline, dateline, pvs LONDON)

* Euro hits more than 2-1/2-year high vs dollar of $1.1963

* Dollar index hits roughly 16-month low of 92.369

* Dollar still hurting from Friday comments from Yellen, Draghi

* Tropical Storm Harvey impact weighs on dollar

* Graphic: World FX rates in 2017

By Sam Forgione

NEW YORK, Aug 28 (Reuters) - The U.S. dollar dropped to its lowest in roughly 16 months against a basket of major currencies and a more than 2-1/2-year low against the euro on Monday, following comments from central bankers on Friday and worries over Tropical Storm Harvey.

The greenback extended losses after tumbling on Friday after U.S. Federal Reserve chair Janet Yellen did not mention monetary policy at a summit of central bankers in Wyoming, moderating expectations the Fed will raise interest rates further this year.

European Central Bank President Mario Draghi’s decision to hold back from talking down the euro at the central bankers’ meeting in Jackson Hole, despite the currency’s double-digit gains this year, continued to weigh on the dollar and sent the euro to $1.1963 Monday, its strongest against the greenback since January 2015.

The dollar also weakened after Tropical Storm Harvey paralyzed Houston, Texas, the nation’s fourth-biggest city, spurring worries about the storm’s potential impact on the U.S. economy. The dollar index, which measures the greenback against a basket of six major rivals, hit its lowest since May 2016 of 92.369.

“In general, what you’re seeing is a consistent tone of dollar weakness,” said Kathy Lien, managing director at BK Asset Management in New York.

“The disappointment from Yellen at Jackson Hole on Friday has carried over to trading this week,” Lien said, adding that Draghi’s remarks continued to underpin the euro while the impact of Harvey was weighing slightly on the greenback.

A public holiday in global foreign exchange capital London kept the market subdued. While hitting multi-month lows, the dollar index was last down only 0.4 percent and the euro was up just 0.2 percent.

The euro was broadly expected to remain firm in the short-term as investors focused on the ECB and whether it will announce plans to reduce debt-buying at its September policy meeting next week.

“(Draghi) does not seem to be overly concerned with the current euro levels, which is the market’s justification to move the euro higher,” said Commerzbank currency strategist Esther Reichelt in Frankfurt.

The greenback was last down slightly against the yen at 109.27 yen after touching an eight-day high on Friday of 109.84 yen. Investors awaited Friday’s August U.S. non-farm payrolls report for further trading incentives.

Additional reporting by Jemima Kelly in London; Editing by Bernadette Baum

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