* Dollar index hits 8-month low, EUR/USD hits 6-month high
* Dudley comments on economy push dollar lower
* Speculation of more Fed QE batters U.S. currency
* U.S. ISM index falls, undermines dollar
(Updates prices, adds details)
By Gertrude Chavez-Dreyfuss
NEW YORK, Oct 1 (Reuters) - The dollar plunged to a
six-month low against the euro on Friday after a Federal
Reserve official said U.S. growth has been generally
disappointing, which strengthened the case for more
quantitative easing.
More action by the Fed to boost growth will likely be
warranted unless the outlook improves, William Dudley,
president of the New York Fed, said on Friday. For details, see
[]
The dollar did not get a boost from stronger-than-expected
U.S. personal income and consumption data as the currency's
weak trend is firmly entrenched. The safe-haven dollar was also
suffering from a return of risk appetite after the U.S. data
and a report showing China manufacturing was better than
forecast. []
"The only chance to keep the dollar supported for the near
term is if the numbers start looking better," said Ron Simpson,
director of FX research at Action Economics in Tampa, Florida.
"A lot of the future for the dollar is going to depend on
the data. If the data stays decent, the market will start to
price out quantitative easing," he added.
The euro <EUR=EBS> rose to $1.3778, its highest since
mid-March, according to the EBS trading platform, breaking
through resistance around $1.3692, a peak last hit in April.
Markets also took out key option barriers at $1.3700 and
$1.3750, traders said, but a further barrier looms at $1.3800.
After that $1.38 level, the next big target is $1.3897, the
61.8 percent Fibonacci retracement of the move from the
November 2009 peak and the June 2010 low.
Asian central banks were seen selling the U.S. currency for
euros to rebalance their books. Market players said Asian
central banks bought dollars versus local currencies in Asian
hours and simultaneously sold the greenback to rebalance their
reserve portfolios by buying euros.
The euro, which was up 2 percent this week, is poised to
close above its 55- and 100-week moving averages at $1.3612 and
$1.3572, respectively. Analysts said this would open the way to
more gains. The euro gained more than 7 percent in September --
its best monthly performance since December 2008.
In midday New York trading, the euro was up 0.9 percent at
$1.3749.
Losses against the euro helped push the dollar lower
against a basket of major currencies, with the dollar index
<.DXY> falling to 78.100, its lowest since January. The index
fell more than 5 percent in September, its worst monthly drop
since May 2009.
A weak U.S. manufacturing survey, showing a dip in the
Institute for Supply Management's index to 54.4 last month from
56.3 in August, also pressured the greenback.
"Right now dollar weakness is across the board, so if we
hit any technical or specific strength in a currency, it will
just be exacerbated," said Joseph Trevisani, chief market
analyst at FX Solutions in Saddle River, New Jersey.
Against the Japanese yen <JPY=>, the dollar slipped 0.2
percent to 83.29 yen, edging closer to a 15-year low of 82.87
yen hit last month. Traders say a fall below that level may
trigger intervention.
Japan's banks are said to be on the bid in dollar/yen
between 83.15 yen, a post-intervention low, and 83.35.
Japanese Finance Minister Yoshihiko Noda said on Friday he
would continue to take decisive steps on currency moves when
necessary. []
U.S. dollar weakness propelled the Australian dollar to a
fresh two year-high against the U.S. currency at US$0.9751
<AUD=D4>.
Traders were wary, however, of pushing the Aussie dollar
higher as global uncertainty has increased. The higher-yielding
Australian currency thrives when there is risk-taking in the
market.
