* Dollar/yen retreats from 2-1/2 month high
* Dollar index eases back after hitting 7-month high
* China exports fall 10 pct in September, weighs on dollar
(Recasts, updates prices, adds quote, changes byline, dateline;
By Gertrude Chavez-Dreyfuss
NEW YORK, Oct 13 The dollar tumbled from a
seven-month high on Thursday, as risk appetite took a turn for
the worse after soft Chinese trade data spooked a market that is
expecting an interest rate increase from the Federal Reserve by
the end of the year.
The U.S. currency also fell from a more than two-month high
against the yen and Swiss franc, two safe-haven currencies that
benefit in times of political or financial stress.
"A significant slowdown in Chinese growth could once again
foil the plans of U.S. authorities to stabilize monetary
policy," said Boris Schlossberg, managing director of FX
strategy at BK Asset Management in New York.
"Still it may be premature to consider such a possibility,
but today's news certainly sets the stage for a deeper
correction in the dollar," Schlossberg added.
Exports from China, the world's second largest economy, fell
5.6 percent in yuan terms in September from a year earlier and
10 percent in dollars.
The dollar has gained more than two percent so far this
month against a basket of currencies, boosted by U.S. rate hike
expectations. Investors have priced in a roughly 70 percent
chance the Fed would nudge rates higher at its December policy
meeting, a prospect reinforced by Wednesday's release of the
last Fed monetary policy meeting minutes.
Minutes of the Fed's September meeting showed that the
Federal Open Market Committee was deeply divided over the timing
of the next interest rate hike, as several members agreed the
Fed should raise rates in the near term if U.S. data continued
In mid-morning trading, the dollar index slipped 0.3 percent
to 97.695, after notching a seven-month peak earlier in
"I believe that spreads between U.S. Treasury yields and
those of other major sovereign bonds will be a key indication on
how the dollar will perform," said UK-based Lukman Otunuga, FXTM
research analyst. "If spreads continue to widen, the dollar
index could be heading towards 100 by year-end."
The dollar was last down 0.7 percent against the yen at
103.41 yen, after hitting its strongest level since late
The U.S. currency also fell from 2-1/2 month peaks versus
the Swiss franc and last changed hands at 0.9878 franc, down 0.3
The euro fell briefly below $1.10 for the first time since
July, but quickly recovered to trade 0.2 percent higher on the
day at $1.1028
(Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by
Patrick Graham in London; Editing by Frances Kerry)