* U.S. Q4 GDP data paints a bleak picture
* Dollar benefits from safe haven bid
* Citi news adds to dollar's safe haven allure
(Recasts, updates prices, adds comment)
By Nick Olivari
NEW YORK, Feb 27 (Reuters) - The dollar rose broadly on
Friday as poor U.S. economic data, weak equity markets and
global banking concerns prompted rising risk aversion which led
to safe-haven buying of the U.S. currency.
Government data showed the U.S. economy shrank at a 6.2
percent annual rate in the fourth quarter, a
larger-than-expected contraction and worse than the prior
reading. For details, see [].
Adding to concerns about the banking system, the U.S.
government committed to holding up to 36 percent of Citigroup's
<C.N> common shares to bolster the fallen financial giant's
capital base, and gave most of the bank's board their marching
orders. [].
The deal sent bank stocks and the broader equity market
lower.
The economic data is "more negative news on the U.S. and
the risk aversion trade remains in force, which means you've
got to turn around and buy the dollar," said Adam Fazio, senior
currency strategist at CIBC World Markets in New York. "It's
already moving in this direction anyway because of the
Citigroup news."
In early New York trade, the euro fell 0.7 percent to
$1.2643 <EUR=>, sterling fell 0.9 percent to $1.4175 <GBP=>,
while the dollar gained 0.4 percent against the Swiss franc to
1.1694 francs <CHF=>.
Sentiment toward the euro also was undermined by losses on
European stock markets with investors shrugging off news that
global development banks had launched a coordinated plan to
lend up to 25 billion euros to shore up banks in crisis-hit
eastern Europe. [].
The euro-zone's unemployment rate crept up more than
expected in January while the inflation was confirmed at its
lowest in almost 10 years, data showed on Friday.
[].
YEN STRIKES BACK
The yen was the other bright spot for currency investors
with the dollar losing 0.6 percent to 97.84 yen -- taking it
away from three month highs hit the previous day at 98.70
according to Reuters data <JPY=>.
The dollar pared losses against the yen after a report
showed business activity in the U.S. Midwest in February
contracted at a less severe rate. [].
Yen strength pulled the euro down 1.3 percent to 123.69 yen
<EURJPY=R>.
Traders cited month-end flows for the yen rise even as
Japanese industrial output data continued to paint a bleak
picture of the economy.
On a monthly basis the dollar is on course for a rise of
more than 8.4 percent on the yen, its biggest monthly gain in
percentage terms since 1995.
Japanese industrial production plunged 10.0 percent in
January from the previous month, posting its biggest drop on
record and underscoring the somber outlook that has helped
drive the yen lower in the past couple of weeks. []
Analysts said the data did little to change views that the
yen would resume its slide once profit-taking and month-end
selling by Japanese exporters, to benefit from the favorable
exchange rates, had worked its way through.
(Additional reporting by Gertrude Chavez-Dreyfuss in New York;
Editing by Tom Hals)
