* US dollar falls on dovish comments from Fed's Bullard
* ECB's Trichet, Paramo talk about exit strategy
* Dollar hits 6-week low vs yen; high-yielders rise
* Euro zone services grow at fastest pace in 2 yrs-survey
(Updates prices, adds comments, changes byline, dateline;
previous LONDON)
By Gertrude Chavez-Dreyfuss
NEW YORK, Nov 23 (Reuters) - The U.S. dollar weakened
broadly on Monday, hitting a six-week low against the yen after
a Federal Reserve official affirmed expectations U.S. interest
rates would stay low for some time.
A low Fed funds rate would limit returns on many U.S.
investments, prompting investors to diversify out of the
currency and seek other, riskier assets with higher yields.
St. Louis Federal Reserve President James Bullard said on
Sunday the Fed should keep alive its mortgage-related assets
purchase program beyond a planned end date to help stimulate
the economy. For the story click on [].
"It's a more tentative risk-seeking environment due to
mixed flows into year-end central bank talk, such as those of
Bullard's," that want to extend MBS purchases into year-end,
said Amelia Bourdeau, senior currency strategist at UBS in
Stamford, Connecticut.
That has kept the dollar under pressure, she added.
In contrast, both European Central Bank President
Jean-Claude Trichet and executive board member Jose Manuel
Gonzalez Paramo discussed plans about exiting its quantitative
strategy. On Monday in Madrid, Trichet said that as the
situation becomes more normal, the focus in the medium term
calls for a "gradual and timely phasing out of these measures."
[].
Paramo, meanwhile, said on Sunday the ECB could detail
plans for phasing out its quantitative easing at the December
meeting. For the story, see [].
Both remarks have boosted the view that the ECB is likely
to exit its easing strategy ahead of the Fed, underpinning the
euro against the dollar.
Selling in the dollar came as oil rose and gold prices hit
record highs. Analysts also said moves were exacerbated by thin
liquidity with Tokyo markets shut and ahead of Thursday's U.S.
Thanksgiving holiday.
GROWTH IN EURO ZONE SERVICE SECTOR
In early New York trading, the euro was up 0.9 percent at
$1.4990 <EUR=>. Against the yen, the euro <EURJPY=R> rose 0.7
percent to 133.07 yen.
The euro was supported after a key survey showed the euro
zone's service sector grew at its fastest pace in two years in
November, suggesting an economic recovery will continue in the
fourth quarter, albeit at a slower rate. []
The ICE Futures dollar index <.DXY> dropped 0.85 percent to
75.005, off a two-week high of 75.879 hit on Friday.
Expectations have been growing that the Fed funds rate will
stay essentially at zero well into 2010, even as rates in other
countries rise, and this has contributed to the dollar's steady
decline since March.
Against the yen, the dollar fell 0.2 percent to 88.77 yen
<JPY=>, having earlier hit a six-week low of 88.58 yen,
according to Reuters data.
Gold prices <XAU=> jumped to a record high $1,167.45 per
ounce. Demand for higher-risk assets increased, with European
shares <> rising 1.6 percent on the day while oil prices
<CLc1> rose 2.3 percent.
Higher gold and oil prices boosted riskier commodity-linked
currencies, with the Australian <AUD=D4> and New Zealand
<NZD=D4> dollars each climbing 1 percent or more against their
U.S. counterpart.
The U.S. dollar also fell 1.3 percent against the Canadian
dollar to C$1.0581 <CAD=D3>.
"As we look ahead, divergence in central bank policy will
be a key driver in FX markets - there are a lot of liquidity
issues here. It's not just about interest rates," said Ned
Rumpeltin, currency strategist at Nomura in London.
(Additional reporting by Naomi Tajitsu in London; Editing by
Padraic Cassidy)
((gertrude.chavez@thomsonreuters.com; +1 646 223 6322;
Reuters Messaging: gertrude.chavez.reuters.com@reuters.net))
