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GLOBAL MARKETS-Dollar slumps, U.S. jobs data hits stocks

Thursday February 12, 9:17 am ET
By Simon Johnson

LONDON, Feb 12 (Reuters) - The prospect of no quick rise in U.S. interest rates allied with weak jobless and mixed retail sales figures in the world's largest economy undermined the dollar on Thursday and pegged back earlier gains in European stocks.

Wall Street looked set to open slightly lower after data showed an unexpected rise in first time U.S. jobless claims and a fall in retail sales in January.

U.S. stocks hit a 32-month high on Wednesday after Federal Reserve Chairman Alan Greenspan told a Congressional committee the U.S economy was growing vigorously but reassured investors that no interest rate hike was imminent.

Euro zone government bond prices were flat after racking up strong gains on Wednesday while crude oil and safe haven gold slipped slightly on profit taking.

With U.S. interest rates on hold for some time and economic indicators mixed, the dollar slipped to within a cent of its all time low against the euro.

Markets looked forward to a second dose of Greenspan at 1500 GMT but the damage to dollar bulls was already done on Wednesday.

"After the move yesterday there is probably not much room for a huge jump of the euro," said Lauren Germain, currency strategist at Banc of America Securities in New York.

"You would expect a bigger reaction because the numbers today were slightly disappointing. But a soft labor market and weak economic data were priced in yesterday after Greenspan's remarks."

By 1410 GMT the dollar was holding at $1.2816 per euro, just above the day's one-month low of $1.2846.

The dollar was at 105.32 yen, having inched down to a three-year low around 105.15 on Wednesday before recovering on what New York traders suspected might have been Bank of Japan yen-selling intervention.


Mixed news on the U.S. economy pegged back early gains in European stocks.

By 1410 GMT, the FTSE Eurotop 300 index was down 0.2 percent at 994 points, while the DJ Euro Stoxx 50 index was 0.2 percent down at 2,886 points.

Earlier Japan's Nikkei Index rose close to one percent and shares elsewhere in Asia climbed to a fresh four-year peak after strong gains on Wall Street on Wednesday.

European government debt yields were flat after the U.S. data.

At 1410 GMT, the interest rate sensitive two-year Schatz yield was at 2.32 percent, steady on the day. It touched a new four-month low at 2.306 percent, briefly extending Wednesday's sharp falls. The benchmark 10-year Bund yield was at 4.12 percent, up 1.0 basis point.

Brent crude futures slipped as scepticism grew that production cartel OPEC would fully carry out a threatened supply cut. April Brent fell 7 cents to $29.89.

Safe-haven gold dipped after Wednesday's dollar-related gains to stand at $410.70/$411.75. against its New York close at $411.25/$412.

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