* Dollar index hits 16-mo low; dlr/swiss franc record low
* Euro turns higher vs dollar despite new periphery fears
* Dollar below 200-day MA vs yen; QE2 seen staying put
* Buying short dated USD/JPY seen a good trade
(Updates prices, adds quotes, graphics)
By Julie Haviv
NEW YORK, April 14 (Reuters) - The dollar dropped broadly
on Thursday, reaching a record low against the Swiss franc,
with more weakness likely so long as U.S. Federal Reserve and
European Central bank policies continue to diverge.
U.S. economic numbers kept intact expectations the Federal
Reserve's $600 billion asset-buying program will stay in place
until June. []
The Fed's second round of quantitative easing, called QE2,
has been a bane for the U.S. dollar as it is tantamount to
printing money.
The euro, in contrast, remains supported by the prospect of
higher interest rates in the euro zone despite comments by
Germany that Greece may need to restructure its debt
[].
Top ECB policymakers sent fresh warnings about rising euro
zone inflation risks on Thursday, with one likening the current
economic situation to that at the start of the bank's last rate
hike cycle in 2005. The ECB raised rates to 1.25 percent last
Thursday. []
The ICE Futures' dollar index dropped to a fresh 16-month
low at 74.617 <.DXY>. In early afternoon, it was down 0.4
percent at 74.714.
"Despite the turmoil in Egypt, Libya and all of the other
shocks, the euro still managed to move higher," said Rob
Bogucki, head of FX North American trading at Barclays Capital
in New York.
The euro has gained 8.3 percent on the dollar in 2011 even
with events that would typically be negative for the currency,
such as uprisings in the Middle East and Japan's earthquake.
In early afternoon New York trading, the dollar fell 0.5
percent against the Swiss franc <CHF=> at 0.8916, according to
Reuters data. It earlier hit a record low of 0.8892.
The dollar fell against the yen, trading down 0.6 percent
at 83.38 yen <JPY=EBS>.
The euro was up 0.3 percent at $1.4484 <EUR=EBS> in
volatile trading. It was trading lower earlier following a
resurgence of sovereign debt fears.
"The dollar remains under pressure without a doubt. Even
though we have these headlines on Greece, it's not necessarily
harming the euro," said John McCarthy, director of currency
trading at ING Capital Markets in New York.
"The market to some extent is ignoring these headlines or
investors simply believe Europe can solve its problems. People
are just selling dollar on rallies and buying euros on dips."
One trader cited real money offers above 83.50 yen with
further falls likely to target the 100-day moving average at
around 82.72 yen.
The greenback's losses pushed it below its 200-day moving
average near 83.43 yen as investors cut sizable long positions
built after the U.S. currency's speedy ascent from its record
low of 76.25 in March.
The dollar, in particular, was badly hit by U.S. initial
jobless claims, which were higher than expected in the latest
week. See [].
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Graphic - http://r.reuters.com/jek98r
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While investors appear intently focused on Fed rhetoric in
recent weeks, economic data flow has comparatively flown under
the radar.
Todd Elmer, G10 strategist at CitiFX in New York, said
Friday's U.S. consumer price index reading could see a break in
this pattern since there appears to be the risk of a relatively
large surprise.
"Furthermore, we believe that strength would represent the
bigger 'shock' to the market," he said. "Transmission from such
a shock is likely to be strongest on USDJPY, so we see value in
leveraging the recent dip to add short-dated upside via
options."
(Additional reporting by Gertrude Chavez-Dreyfuss; Editing
by Andrew Hay) ((julie.haviv@thomsonreuters.com; +1 646 223
6153; Reuters Messaging: julie.haviv.reuters.com@reuters.net))
