Dollar sags on poor U.S. data; Aussie, Loonie fall on oil

By Gertrude Chavez-Dreyfuss

NEW YORK (Reuters) - The dollar tumbled to a near five-month low against the yen and a 2-1/2-week trough versus the euro on Friday, hammered by a combination of poor risk appetite arising from a renewed drop in oil prices and weak U.S. economic data.

The downbeat economic numbers along with the meltdown in oil and stocks could further slow the pace of the Federal Reserve's already gradual tightening policy, a negative scenario for the dollar.

The dollar index, which measures the greenback against a basket of six other major currencies, was down 0.2 percent at 98.933.

"I think the Fed is going to be reluctant to raise interest rates any time soon," said Joe O'Leary, senior FX trader at Silicon Valley Bank in Santa Clara, California.

"There's just too much uncertainty going on. We also have weak U.S. data, and equity markets getting clobbered. This will all affect U.S. growth."

Data showed on Friday that U.S. retail sales fell in December as unseasonably warm weather curbed purchases of winter apparel and cheaper gasoline weighed on receipts at service stations. U.S. producer prices were also lower last month due to weak energy costs, while the country's industrial output declined for a third straight month.

Following the poor U.S. economic data, the interest rate futures market has now priced in just one additional rate move by the Federal Reserve this year, compared with expectations of three hikes.

Commodity-based currencies such as the Australian, New Zealand and Canadian dollars also took a nosedive on the back of another slide in Chinese stock markets following an almost 5 percent tumble in oil prices to less than $30 per barrel.

In late trading, the dollar fell to 116.51 yen, the lowest since Aug. 24. It was last at 117.02 yen, down 0.9 percent.

The euro rose to $1.0984, its highest since Dec. 29, and was last at $1.0913, up 0.5 percent.

The Aussie sank to US$0.6824 versus the greenback, the lowest since April 2009, while the New Zealand dollar fell to a 3-1/2-month trough of US$0.6382.

The Canadian dollar, meanwhile, dropped to a fresh 12-year low against the U.S. dollar. The greenback was last up 1.2 percent at C$1.4534

Richard Benson, co-head of portfolio management at currency fund Millennium Global, said the Canadian dollar, down by a third in value against its U.S. counterpart since 2012, was suffering from bets on more easing of monetary policy next week.

(Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Patrick Graham in London; Editing by James Dalgleish and Sandra Maler)