* Dollar hits 6-month high vs euro, then pulls back
* Rebound in oil and gold drags dollar off high vs euro
* Euro zone data eyed for sustainability of dollar gains
By Chikako Mogi
TOKYO, Aug 18 (Reuters) - The dollar hit a six-month high
against the euro on Monday then slipped as oil and commodity
prices bounced back, but losses were limited on mounting worries
that the euro zone economy is stalling.
Oil rose more than $1 to above $115 a barrel <CLc1> on supply
concerns, as markets settled down from a sharp sell-off in the
euro, Australian dollar and commodities in the past two weeks
when investors unwound bets on the global economy holding up.
Gold jumped more than $10 <XAU=> to near $800 and was up from
a nine-month low, recovering from last week's sell-off and
helping the Aussie dollar climb.
The dollar remained vulnerable to a further recovery in oil
and commodities because their tumble had reinforced its broad
gains, traders said.
As investors bailed out of bets that Europe and the global
economy could withstand the U.S. downturn and credit crisis, the
euro has plunged nearly 6 percent against the dollar in just two
weeks.
"The pace of dollar appreciation versus the euro is too
fast," said Tomoko Fujii, head of Japan strategy and economics at
Bank of America.
Fujii said that while the dollar's gains were not yet backed
by an improving economic outlook, "it is clear there has been a
major disappointment with the euro."
The euro fell to a six-month low of $1.4645 on trading
platform EBS in early Asian trade before recovering to $1.4744
<EUR=>, up 0.4 percent from late Friday U.S. trade.
If economic data this week show more troubles in the euro
zone and stoke expectations for eventual interest rate cuts, any
rebound in the single currency will prove short-lived, traders
and analysts said.
"The market theme is now on when the ECB will cut interest
rates, with traders expecting the ECB to offer some signal in the
autumn and follow through with action next year," said Hiroshi
Yoshida, a trader at Shinkin Central Bank.
This week's economic reports in Europe includes Germany's ZEW
gauge of economic sentiment and euro zone service sector
activity. Last week's data showed euro zone growth contracted in
the second quarter for the first time ever.
The dollar index, which measures the dollar's value against a
basket of six currencies, fell 0.4 percent to 76.878 <.DXY>, down
from a seven-month high of 77.268 struck on Friday.
DOLLAR OUTLOOK BRIGHTENS
The dollar's stronger tone was seen likely to last for a
while as investors see growing signs of economic deterioration in
other regions while the U.S. economic slowdown may be moderating.
Market expectations were growing for central banks in
Australia and Britain to cut interest rates in coming months. In
contrast, the Federal Reserve was expected to keep U.S. rates on
hold for a while, after slashing them over the past year.
"Investors are gradually recovering confidence in the
dollar, and the main driver is a drop in oil and other
commodities prices," said a senior dealer at a European bank.
The dollar's gains may be limited against the yen, which
could strengthen as Japanese retail traders cut big positions in
Australian and New Zealand dollars to try to limit losses from
the sharp slide in those currencies over the past few weeks.
The dollar was down 0.3 percent at 110.19 yen <JPY=>, off a
seven-month peak of 110.67 yen reached on Friday. The euro edged
up 0.1 percent to 162.48 yen <EURJPY=R>.
Japanese buying of yen related to the redemption of U.S.
bonds helped boost the yen. On Friday, the U.S. Treasury issued
$26 billion of coupons at the same time as $43 billion of
Treasuries matured.
The recovery metal prices lifted the Australian dollar 0.8
percent to $0.8725 <AUD=D4>.
(Additional reporting by Eric Burroughs; Editing by Edwina
Gibbs)
