* Euro bounces vs dollar but hovers close to 1-month lows
* Concerns over euro zone periphery remain
* Swiss franc rallies broadly on safe-haven demand
(Adds quote, updates prices, changes byline)
By Wanfeng Zhou
NEW YORK, Aug 16 (Reuters) - The U.S. dollar fell against
major currencies on Monday as early negative sentiment stemming
from weak Japanese growth data dissipated and traders decided
the currency's rally last week was too fast.
U.S. stocks recovered from an earlier decline on global
economic worries sparked by the disappointing Japanese data.
That saw the greenback give up some of last week's gains when
risk aversion had pushed it up more than 3 percent against a
basket of currencies.
Currency investors shrugged off U.S. manufacturing and
housing data that pointed to weakness in the economy, though
sentiment remained cautious overall with the safe-haven yen and
the Swiss franc posting broad gains.
"We saw risk aversion abating. Despite some weaker data out
of the U.S. including the NAHB (housing) index coming in weaker
than expected, the market preferred to ignore that," said
Matthew Strauss, senior currency strategist at RBC Capital
Markets in Toronto.
The ICE Futures U.S. dollar index, which tracks the
greenback versus a basket of currencies, was last down 0.6
percent to 82.460 <.DXY>. The index gained 3.13 percent last
week, the biggest weekly rise in nearly two years.
"I think the dollar strength at the end of last week was
probably somewhat overextended and the market is giving back
some of that," said Dean Popplewell, chief strategist at FX
brokerage OANDA in Toronto.
The euro recovered against the dollar after falling almost
4 percent last week, its largest weekly drop since the week of
May 9.
It was last at $1.2817, up 0.5 percent <EUR=> after
climbing as high as $1.2871, recovering from one-month lows hit
in Asian trade.
Analysts said the euro remains vulnerable to mounting
concerns about the health of the continent's banking sector and
sovereign debt situation in peripheral economies.
The premium investors demand to hold 10-year Irish and
Greek government bonds rather than German Bunds widened, while
the cost of insuring their debt against default increased.
"The euro bounce ran out of steam around 1.2870, and given
the renewed pressures on the periphery, we think euro gains are
going to be limited near-term," said Win Thin, senior currency
strategist at Brown Brothers Harriman.
Thin said levels to look out for on the downside are
1.2600, the 50 percent retracement level of the euro's June to
August rally and a band of minor support around 1.2730-40, the
lows from July and August.
SWISS RALLY
The dollar fell 1 percent to 85.33 yen <JPY=> with
investors like hedge funds still preferring to go short on the
greenback.
The dollar was down 1.1 percent at 1.0391 Swiss francs
after falling to its lowest since Aug. 6 <CHF=>.
The Swiss franc and the yen, both used to fund leveraged
carry trades, are typically sought in times of market stress.
The euro was 0.7 percent lower against the franc <EURCHF=>
at 1.3317, having earlier dropped to its lowest since July 8.
Traders said funds were lightening positions in euro/Swiss
franc with sparse liquidity exacerbating the fall.
The yen's gains came despite weaker-than-expected Japanese
gross domestic product numbers. Anemic growth and a rising
currency pose a headache for Japanese policy makers.
Investors are wary of a possible meeting between Prime
Minister Naoto Kan and Bank of Japan Governor Masaaki Shirakawa
later this week to discuss the currency's strength.
[]
(Additional reporting by Nick Olivari and Vivianne Rodrigues;
Editing by Leslie Adler)
