* 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
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
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
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.