(Recasts, updates prices, adds comment, changes byline,
changes dateline from LONDON).
* Euro hits six-week high vs dlr on expected ECB rate rise
* Yen falls broadly, hits seven-month low versus euro
* U.S. April pending home sales due at 10 a.m. (1400 GMT)
NEW YORK, June 9 (Reuters) - The euro rose to a six-week
high versus the dollar and a seven-month peak against the yen
on Monday, bolstered by expectations of a European Central Bank
rate hike in July.
Expectations for an ECB rate hike have mounted since
Thursday when the ECB left policy on hold at 4 percent as
forecast, but President Jean-Claude Trichet said the central
bank was on high alert over inflation and a number of
policymakers supported raising rates.
"The weak dollar story has morphed into a strong euro story
by virtue of the ECB's signaling a rate hike next month," said
Marc Chandler, senior currency strategist at Brown Brothers
Harriman in a research note to clients. "Few can keep up with
the euro."
The euro rose to a high of 1.5845 <EUR=> before settling to
change hands at 1.5788, up 0.1 percent from Friday's New York
close. The euro climbed to a seven-month peak versus the
ultra-low yielding Japanese currency at 167.15 yen, according
to Reuters data <EURJY=>, before surrendering some gains to
trade at 166.76 yen, up 0.7 percent.
The yen was also pressured against the dollar which rose
0.8 percent to 105.60 yen <JPY=>.
The pound got a rare boost from higher-than-expected UK
factory gate inflation data, but it remained pressured near an
all-time low versus the euro <EURGBP=> as a slew of weak UK
data in recent weeks has undermined confidence in the UK
economy.
Oil prices also weighed on the greenback, with crude
holding within $2 of Friday's record high $139.12 per barrel
[].
"It seems like there is a strong correlation between the
oil price and euro/dollar, with the ECB being more trigger
happy when it comes to reaction to prices while the Fed is more
concerned about growth," said John Hydeskov, senior FX analyst
at Danske Markets in Copenhagen.
RATE WATCH
In a sign that the European economy is taking a stronger
euro in its stride, the Sentix group's monthly index of
sentiment in the euro area rose to 5.2 from 3.5, its highest
level since January.
In contrast, the dollar's yield appeal was hit on Friday by
news of the biggest jump in the U.S. unemployment rate in 22
years, to 5.5 percent in May, denting expectations the Federal
Reserve will hike interest rates before the year is out.
A Reuters poll of economists taken after Thursday's Trichet
comments showed a median 47 percent chance of a July rate hike
to 4.25 percent []. In a poll taken a week earlier, the
majority expected that the next ECB move would be a cut.
However economists remained more cautious on ECB rate
expectations than markets.
"With markets now pricing in 75 basis points of ECB hikes
by year-end, however, we think there is a reasonable chance ECB
officials will attempt to calm such speculation," Commerzbank
Corporates & Markets said in a research note.
Further clues on the depth of the U.S. economic slowdown
will come with April pending home sales figures at 10 a.m.
(1400 GMT).
The calendar also features speeches from ECB Governing
Council member Guy Quaden as well as several Fed officials,
including chairman Ben Bernanke at 6 p.m. (2200 GMT).
Last week Bernanke surprised markets with a rare warning on
currencies, saying the Fed was paying attention to the moves in
the dollar and the implications for inflation.
(Addtional reporting by Simon Falush in London)
(Reporting by Nick Olivari; Editing by Tom Hals)
