(Recasts, updates prices, adds comment, changes byline,
dateline; previous LONDON)
* Mixed U.S. data still supports rate hike view
* Euro recovers after early weakness amid political woes
* ECB chief Draghi points to need for continued stimulus
By Gertrude Chavez-Dreyfuss
NEW YORK, May 30 The dollar fell against most
currencies on Tuesday, weighed by a drop in U.S. Treasury yields
amid a cautious global sentiment with political worries in
Europe and weaker stock and commodity markets after a long U.S.
"There is a whiff of risk aversion about the markets," said
Shaun Osborne, chief FX strategist at Scotiabank in Toronto,
after Japan's Nikkei dropped, European stocks fell and U.S.
equity indexes slid.
Commodities were also on the defensive, with U.S. crude oil
futures trading below $50 per barrel.
Benchmark U.S. 10-year Treasury yields fell to a more than
one-week low, and the dollar was further undermined by
weaker-than-expected U.S. consumer confidence data.
In the euro zone, falls in inflation in Spain and several
German regions as well as European Central Bank chief Mario
Draghi's commitment to continued emergency stimulus initially
pushed the euro lower.
Signs that elections in Italy may come as early as September
also added to the early pressure on the euro.
"We always knew Italy was going to come back into the
market's sights, but I think people thought we would have a
longer stay of execution," said Rabobank currency strategist
Jane Foley in London.
"It does seem like the market will have to face worries
about elections and populism again over the summer. That of
course is a drag for the euro."
But the euro recovered as the dollar struggled. The dollar
index has been soft over the last two weeks on concerns over
U.S. President Donald Trump's administration.
In mid-morning trading, the dollar index was down 0.2
percent at 97.29, with the euro up 0.2 percent at
Against the safe-haven yen, the dollar dropped 0.3 percent
to 110.95 yen, while sliding 0.4 percent versus the Swiss franc
to 0.9743 franc.
Tuesday's U.S. economic data, while mixed, still backed the
expectation that the Federal Reserve will raise interest rates
next month, analysts said.
U.S. consumer spending recorded its biggest increase in four
months in April and monthly inflation rebounded. Consumer
spending, accounting for more than two-thirds of U.S. economic
activity, increased 0.4 percent last month.
The so-called core personal consumption expenditure price
index, the Fed's preferred inflation measure, also bounced back
0.2 percent after dipping 0.1 percent in March.
(Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by
Patrick Graham in London; Editing by Meredith Mazzilli)