* Euro zone inflation surprise drives euro higher
* U.S. revised GDP data hurts dollar
* Dollar rebounds against ruble
By Sam Forgione
NEW YORK, Feb 28 (Reuters) - The dollar fell to a two-month low against the euro on Friday, posting its worst monthly performance since April after data showed steady euro zone inflation and a downward revision to fourth-quarter U.S. economic growth.
The European Union’s statistics office Eurostat estimated that consumer prices in the 18 countries sharing the euro rose 0.8 percent year on year this month, a sign of stability that cooled expectations the European Central Bank might ease monetary policy as early as next week.
“Everyone’s probably re-adjusting their expectations as to how aggressive the ECB will be with respect to its monetary accommodation,” said Mark Frey, chief market strategist at Cambridge Mercantile Group in Victoria, British Columbia.
The U.S. Commerce Department, meanwhile, said on Friday gross domestic product expanded at a 2.4 percent annual rate in the fourth quarter, down sharply from the 3.2 percent pace of growth reported last month and the 4.1 percent expansion logged in the third quarter.
The data stoked fears the Federal Reserve could pause cuts to its monthly bond-buying program, which analysts said would hurt the dollar since it would help keep interest rates low and drive capital flows into higher-yielding assets outside the United States.
“If we saw further weakness in the data such as what we’ve seen today, the Fed could slow the pace of removing their monetary accommodation,” Frey of Cambridge Mercantile said.
The euro hit a session high of $1.3824 against the dollar, marking its highest level since late December. It last traded up 0.7 percent at $1.3807. The currency posted its best month against the dollar since April, notching gains of 2.4 percent.
The dollar index, which tracks the U.S. currency’s performance against a basket of major currencies, was last down 0.7 percent at 79.763. The index posted its worst monthly performance since September amid uncertainty surrounding the pace of the Fed’s withdrawal of its asset purchases.
Data from the Commodity Futures Trading Commission on Friday showed speculators reduced bets on the U.S. dollar in the latest week, with net longs falling to their lowest in nearly four months.
The dollar was also last down 0.3 percent against the yen to trade at 101.84 yen.
The yen was seen as investors’ best choice for a safe haven on concerns over a weakening Chinese yuan and tensions in Ukraine.
The dollar recovered losses against the ruble and last traded up 0.11 percent against the Russian currency at 36.045 to the dollar, ending a relief rally that saw the ruble gain versus the dollar after it hit a five-year low on Feb. 26 amid protests in Ukraine.
While the ruble fell modestly against the dollar, Ukraine’s hryvnia held its gains. The dollar was last down 7.62 percent at 9.7 hryvnia, marking a rebound in the Ukrainian currency after it hit a record low against the dollar on Thursday at 10.6 hryvnia.
The recovery in the hryvnia occurred despite ongoing geopolitical tensions in Russia and Ukraine. Armed men took control of two airports in Ukraine’s Crimea region on Friday in what Ukraine’s new leadership described as an invasion and occupation by Moscow’s forces.
The yuan recovered some ground in European trade, but still lost 0.87 percent for the week against the dollar, its biggest weekly loss on record.
Most western bank analysts are agreed that the moves by the People’s Bank of China are aimed at squeezing out some of the speculative money that has banked on the yuan’s steady rise against the dollar over the past decade.
“There is some speculation about introducing this volatility to limit some of the inflows,” said Eric Viloria, currency strategist at Wells Fargo Securities in New York.