* UK data casts doubt on prospect of synchronized recovery
* Euro zone data shows bloc's recovery generally on track
* Euro holds near $1.50 but retreats from 14-week high
(Updates prices, adds comment, adds detail, changes byline)
By Wanfeng Zhou
NEW YORK, Oct 23 (Reuters) - The dollar and euro soared
against sterling on Friday after data showing the UK economy
was still mired in recession stunned investors who had expected
it to return to growth.
The pound shed more than 3 cents against the dollar as it
fell from a six-week high after the British government said the
economy contracted 0.4 percent between July and September.
The euro also gained against sterling, supported partly by
data that suggested the euro zone recovery is gathering pace,
but retreated slightly from a fresh 14-month high around
$1.5060.
The UK data quashed hopes that the downturn there was
ending and rekindled talk that the Bank of England will have to
extend an emergency asset-purchasing program next month.
"It was a pretty horrific report from the UK," said Michael
Woolfolk, senior currency strategist at BNY Mellon in New York.
"The market had been expecting to see all the major economies
recover in the third quarter, and this was a bucket of cold
water for us."
The pound was last down 1.9 percent at $1.6305 <GBP=>, far
from a six-week peak near $1.67 touched earlier. The euro rose
1.8 percent to 92.06 pence <EURGBP=>.
For more on UK GDP, which posted its sixth straight quarter
of contraction, the longest stretch on record, see
[].
For a graphic showing UK GDP growth, click
here: http://graphics.thomsonreuters.com/109/UK_Q3GDP1009.gif
Sterling's sharp fall helped keep the dollar in positive
territory against a basket of currencies <.DXY>. The euro was
down 0.1 percent at $1.5012 <EUR=>.
YEN PRESSURED
The euro has climbed more than 7 percent against the dollar
this year, breaking above the psychologically significant $1.50
level this week as markets brace for the Federal Reserve to
hold U.S. interest at record lows well into next year.
Late Thursday, Chicago Fed President Charles Evans said the
Fed isn't worried about inflation right now but is monitoring
it closely.
A survey released Friday showing that sales of previously
owned U.S. houses hit a two-year high in September briefly
boosted U.S. stocks, but economists say a weak labor market
will continue to drag on the economy in the months
ahead.[]
The dollar rose 0.7 percent to 92.07 yen <JPY=>, a
one-month high, as the spread between 10-year U.S. and Japanese
government bond yields widened in favor of the dollar. That
makes U.S. bonds more attractive to Japanese investors.
The yen also suffered after Japan's banking minister said
the country needed a second extra budget worth around 10
trillion yen, feeding expectations of higher government debt.
Earlier Friday, euro zone purchasing managers indexes and
the Ifo index of German business morale showed the bloc's
economic recovery to be generally on track. [].
Nick Bennenbroek, head of currency strategy at Wells Fargo
in New York, said the euro's failure to push higher is an
indication that "short-term positioning is already very
extended."
(Additional reporting by Steven C. Johnson; Editing by Andrea
Ricci)
