Dollar slides on housing data, political turmoil; stocks flat

By Rodrigo Campos

NEW YORK (Reuters) - The U.S. dollar index touched its lowest since early November on Tuesday, hurt by weaker than expected U.S. housing data and concerns after political turmoil once more hit Washington.

A rally in the euro was reinforced by dollar losses, prompted by allegations that U.S. President Donald Trump disclosed highly classified information to Russia's foreign minister about a planned Islamic State operation.

The story about Trump and Russia "probably is playing out as a weaker dollar on the view that Trump may not be around long enough to deliver his tax reform, which is at least partially priced into the dollar," said RBC Capital Markets currency strategist Adam Cole, in London.

The dollar index fell 0.65 percent, with the euro up 0.91 percent to $1.1073.

The dollar index had reached 14-year highs in early January on the view that Trump's plans for tax cuts and infrastructure spending would boost growth and inflation, but it fell to six-month lows on Tuesday.

The Japanese yen strengthened 0.49 percent versus the greenback at 113.24 per dollar, while Sterling was last trading at $1.291, up 0.13 percent on the day.

On Wall Street, the S&P 500 and Nasdaq Composite touched record highs but later retreated to trade slightly negative. Traders shared concerns about the feasibility of the Trump agenda of tax cuts and deregulation, without taking their eye off the expected economic growth.

"As long as we have growth, whether it is earnings or economic data, the markets are likely to be able to take such (political) headlines in stride," said Matt Miskin, senior capital markets research analyst at John Hancock Investments in Boston, referring to the Trump-Russia headlines.

U.S. manufacturing production posted its biggest increase in more than three years in April, bolstering the view that economic growth picked up early in the second quarter - despite a drop to a five-month low in housing starts.

The Dow Jones Industrial Average rose 20.85 points, or 0.1 percent, to 21,002.79, the S&P 500 lost 0.32 points, or 0.01 percent, to 2,402 and the Nasdaq Composite added 10.33 points, or 0.17 percent, to 6,160.01.

The pan-European FTSEurofirst 300 index rose 0.08 percent and MSCI's gauge of stocks across the globe gained 0.27 percent.

Emerging market stocks rose 0.44 percent. MSCI's broadest index of Asia-Pacific shares outside Japan closed 0.33 percent higher, while Japan's Nikkei rose 0.25 percent.

Oil prices were little changed as traders awaited weekly U.S. inventory data and after Kuwait joined top producers Saudi Arabia and Russia in support of prolonging supply cuts through March 2018 to reduce a global crude glut.

U.S. crude rose 0.02 percent to $48.86 per barrel and Brent was last at $51.88, up 0.12 percent on the day.

U.S. Treasury yields fell after the housing data added to recent soft economic news that has raised new doubts over how many times the Federal Reserve will raise interest rates this year.

Benchmark 10-year notes last rose 3/32 in price to yield 2.3274 percent, from 2.338 percent late on Monday.

Spot gold added 0.5 percent to $1,236.89 an ounce. U.S. gold futures gained 0.54 percent to $1,236.70 an ounce.

Copper lost 0.02 percent to $5,612.00 a tonne.

(Reporting by Rodrigo Campos, additional reporting by Scott DiSavino, Karen Brettell, Dion Rabouin; Editing by Nick Zieminski)