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Dollar battles, US data clouds rate hike outlook

Tokyo - The dollar faced selling pressure on Thursday as a batch of weak US data raised the possibility that the Federal Reserve will push back an interest rate hike beyond mid-year.

In Tokyo, the greenback briefly slipped below the ¥119 level before recovering to ¥119.22 by midday, against ¥119.14 in New York. It was above ¥120 earlier this week.

The euro climbed to $1.0698 and ¥127.48 from $1.0684 and ¥127.29 in US trade.

US industrial production fell 0.6% in March, according to the Fed, twice the decline projected by analysts.

Also, the New York Fed said its Empire State index on manufacturing activity plunged into negative territory in April for the first time since December.

The data came on the heels of a disappointing US retail sales report that had dented the dollar on Tuesday.

The US unit has fallen back in the past few days as the soft figures narrow the chances the Fed will hike interest rates soon. Expectations earlier in the year had been for a rise as early as June as the world's top economy showed signs of strength.

"A June start to interest-rate normalisation is looking ever more unlikely," Sharon Zollner, a senior economist in Auckland at ANZ Bank New Zealand wrote in a client note, referring to Fed monetary policy.

However, there was some good news in Fed's Beige Book report on the state of the economy, which said it continues to grow and the labour market is improving.

Also Wednesday, the European Central Bank voted to keep interest rates at their current all-time lows, as expected and rejected speculation of an early end to its ultra-easy money policy.

After the ECB decided to keep its main policy rate at the record low 0.05%, its chief Mario Draghi said "there is clear evidence that the monetary policy measures we have put in place are effective".

Last month the central bank began a scheme under which it aims to buy billons of euros worth of bonds each month until September 2016 in a bid to kickstart the lacklustre eurozone economy.

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