* Swiss franc hits 2011 high vs dollar, nears record high
* Euro rises, helped by ECB rate hike expectations
* Middle East/North Africa tensions spark risk aversion
(Updates prices, adds quote, details)
By Wanfeng Zhou
NEW YORK, Feb 23 (Reuters) - The Swiss franc edged toward a
record high on Wednesday as turmoil in Libya drove investors to
seek safety, while the U.S. dollar fell broadly as the
greenback appeared to lose its safe-haven luster.
The euro, which for sometime was treated as a risk
currency, rose as investors seeking safety shunned the dollar.
Expectations that interest rates will rise faster in the euro
zone than in the United States helped boost the single
currency.
Stocks markets fell worldwide after political violence in
Libya sent U.S. oil futures to $100 a barrel, fanning concern
about inflation and its impact on the global economy.
"The theme is basically dollar selling on fears that (the
unrest) in Libya could expand," said Brian Dolan, chief
currency strategist at Forex.com in Bedminster, New Jersey.
"The dollar at the moment is not enjoying any kind of
safe-haven respite."
Against a basket of currencies, the dollar <.DXY> was down
0.5 percent at 77.407, after falling as low as 77.255, a near
three-week trough.
The euro hit a session peak of $1.3787 <EUR=EBS> on trading
platform EBS, with gains accelerating after it took out
resistance around $1.3745, the Feb. 9 high. It was last up 0.7
percent to $1.3745. The next key upside target lies at $1.3862,
the February high, traders said.
Recent hawkish comments on inflation from European Central
Bank officials have raised expectations the ECB would hike
interest rates before the Federal Reserve.
By contrast, U.S. Fed fund futures <#FF:> have been on the
rise since early last week as investors push back the expected
timing of the Fed's lifting of interest rates from the current
range of zero to 0.25 percent. See []
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Graphic: Fed fund futures and Mideast conflict:
http://r.reuters.com/zav28r
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DOLLAR NO LONGER SAFE?
Also weighing on sentiment about the dollar, analysts said,
were growing worries about the country's ballooning budget
deficit.
The federal government will run out of money for
non-essential operations if the Democrats and Republicans fail
to agree on funding by the end of next week, which could
unsettle financial markets and risk mass government layoffs.
See []
"There's increasing concern over the U.S. fiscal
situation," said Douglas Borthwick, managing director of Faros
Trading LLC in Stamford, Connecticut.
The dollar has "lost its flight-to-quality status," he
said. "When there are issues of anxiety in the world, people
are now buying the euro rather than buying the dollar."
Borthwick said his firm's latest weekly poll on market
positions for macro funds and real money funds showed
"significant moves out of the U.S. dollar and into the Swiss
franc and euro."
The euro VIX index <.EVZ>, a measure of the currency's
volatility traded on the Chicago Board Options Exchange, spiked
to 11.93 percent on Wednesday from 11.27 percent on Tuesday,
suggesting the expectation of more movements.
Against the Swiss franc, the dollar fell 0.5 percent to
0.9337 franc <CHF=EBS>, after earlier touching 0.9307 franc,
the lowest this year and near the all-time low of 0.9301 set in
December.
Risk aversion also lifted the yen, although higher oil
prices kept a lid on gains, with the Japanese economy
vulnerable due to high oil imports. The dollar last traded down
0.3 percent at 82.54 yen <JPY=>.
(Additional reporting by Gertrude Chavez-Dreyfuss; Editing by
Leslie Adler)
