May 31, 2013 / 1:41 PM / in 5 years

FOREX-Dollar falls to three-week low vs yen, euro hurt by data

* Dollar falls versus yen, rises against euro

* Euro hurt by weak data, NZ dollar falls to 9-month low

* U.S. consumer spending fell in April, inflation subdued

By Wanfeng Zhou

NEW YORK, May 31 (Reuters) - The dollar fell to a three-week low against the yen on Friday after Japan reported accelerating factory output and ebbing deflation and after U.S. data reduced expectations the Federal Reserve could soon scale back its stimulus.

But the U.S. currency was headed for its eight straight month of gains versus the yen, with many analysts expecting further yen weakness on expectations of aggressive monetary easing by the Bank of Japan.

U.S. consumer spending fell in April for the first time in almost a year and inflation pressures were subdued, pointing to a slowdown in economic activity and supporting expectations of the Fed maintaining its monetary stimulus.

“The dollar pared overall gains after another batch of lackluster data suggested talk of Fed tapering might be a bit premature,” said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.

The dollar fell 0.1 percent to 100.59 yen, its lowest since May 9. Traders said it extended falls after stop-loss sell orders were triggered on the break below Thursday’s low of 100.46, though strong support was expected at 100 yen.

The euro fell against the dollar, hurt by month-end flows and data showing record high unemployment and low inflation.

The euro fell 0.5 percent to $1.2988, off Thursday’s three-week high of $1.3061.

The weak euro zone data raised concerns European Central Bank policymakers may ease monetary policy further, although a Reuters poll showed most economists think the ECB will stay on hold.

The dollar index, which measures the dollar’s value against a basket of six major currencies, rose 0.3 percent to 83.259 and was poised to end up 1.8 percent on the month.

Commodity-linked currencies fell sharply, with the New Zealand dollar dropping to a nine-month low of $0.7970. It was last down 1 percent at 0.7989. The Australian dollar fell 0.7 percent to $0.9589.

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