FOREX-Lower bond yields, consumer data pressure dollar

Reuters

* Dollar index falls, lending support to the euro

* Euro gains on speculation data will show rising prices

* Trade subdued ahead of U.S. Thanksgiving holiday

By Wanfeng Zhou

NEW YORK, Nov 26 (Reuters) - The dollar fell against the

euro and the yen on Tuesday, weighed down by lower U.S. bond

yields and data showing U.S. consumer confidence unexpectedly

slipped in November.

The euro also gained on speculation euro zone inflation

data, due later in the week, could show a slight rise, which

would reduce the need for further monetary easing by the

European Central Bank.

U.S. consumer confidence fell in November on worries about

jobs and earnings prospects, according to a private sector

report, but reaction was limited as markets slowed down going

into the Thursday U.S. Thanksgiving holiday.

"Disappointing news on U.S. consumers and end-of-month

positioning caused the buck to fall behind its rivals," said Joe

Manimbo, senior market analyst at Western Union Business

Solutions in Washington.

"At the margin, the lousy confidence data suggested that

consumers might be a bit less willing to spend over the holidays

which could hold back growth for an economy driven mostly by

retail spending."

The euro rose 0.4 percent to $1.3570, having hit a

session high of $1.3574 and triggering stop-loss buy orders

above $1.3560. Near-term resistance is at its Nov. 20 high of

$1.3577, according to Reuters data.

Forecasts are for November euro zone flash inflation at 0.8

percent, year-on-year, up from 0.7 percent in October.

Last month, after a shock drop in inflation, the ECB cut rates

to a record low, pushing the euro to a near two-month trough.

The dollar index, which measures the greenback versus

a basket of currencies, fell as low as 80.610, its lowest since

Nov. 20. It was last down 0.4 percent at 80.612.

Trade was thin ahead of the Thanksgiving holiday.

The dollar index has largely moved in line with falling U.S.

10-year Treasury yields, which fell after mixed

economic data suggested the Federal Reserve could continue its

bond-buying program into the new year.

Other data on Tuesday showed permits for future U.S. home

construction rose to their highest in nearly 5-1/2 years in

October.

Federal Reserve officials have hinted for months that they

are looking to exit an $85-billion-per-month asset-buying

program, causing global markets to gyrate as investors place

bets on when the U.S. central bank will opt to curb its

purchases.

Key U.S. labor market data will be released on Friday, Dec.

6. The Fed wants to see the unemployment rate closer to 6.5

percent from its current 7.3 percent. Economists in a Reuters

survey see that rate edging down to 7.2 percent in November.

A number of analysts say the Fed is likely to keep benchmark

U.S. interest rates lower for longer than previously expected

next year to help prop up the economy.

"The dollar's own issues about whether Fed tapering will

take place or not make the euro the next best alternative," said

Daragh Maher, currency strategist at HSBC. "But the euro is

looking rather toppish here."

The dollar fell 0.4 percent to 101.30 yen, pulling

back from a six-month high of 101.91 yen set on Monday.

New Japanese investment rules could see some buying of the

yen against the dollar and other major currencies by retail

investors in the short term, analysts said.

However, in the longer term the yen will remain weak on

expectations the Bank of Japan's commitment to an ultra-easy

policy will keep it the best funding currency for carry trades,

especially against European currencies.

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