FOREX-Dollar undermined by soft data, Aussie underperforms

* Dollar index softer, euro back near $ 1.10

* U.S. data and Fed comment not helpful for USD

* Commodity currencies underperform, hit by consolidation

By Ian Chua

SYDNEY, March 26 (Reuters) – The corrective bounce in the U.S. dollar faded again overnight, leaving the currency a shade lower early on Thursday in another hint the recent one-way bullish bet is on ice for now.

Disappointing U.S. economic data on Wednesday, on the heels of last week’s dovish steer from the Federal Reserve, knocked the dollar index lower.

It dipped to 96.875, from a high of 97.381. The index was back near a three-week trough of 96.387 set on Tuesday. Earlier this month, it scaled a 12-year peak of 100.390.

Data showed spending on U.S. durable goods fell for a sixth straight month in February, fresh evidence that economic growth slowed sharply early in the year, in part due to bad weather.

Also providing an uncomfortable read for dollar bulls, Chicago Fed President Charles Evans said he was concerned the strong dollar’s “clear disinflationary pressure” could get embedded in expectations.

Evans said that could make it even harder for the Fed to reach its 2 percent inflation target, adding there was “no compelling reason” to hurry and raise interest rates. He urged a delay in rate hikes until the first half of next year.

With the dollar on the back foot, the euro found itself flirting with $ 1.1000 again. It was last at $ 1.0972, and well off a 12-year trough of $ 1.0457 plumbed two weeks ago.

“Our technical analysts think the current correction could extend higher (they are targeting 1.1180) but the longer-term downtrend is still intact,” Elsa Lignos, senior currency strategist at RBC, wrote in a note to clients.

Against the yen, the dollar came within a whisker of a one-month trough of 119.22 yen set on Tuesday. It reached 119.23 before staging a small recovery to 119.47.

In contrast, the euro firmed modestly against its Japanese counterpart to trade at 131.09, staying well clear of a 21-month trough of 126.915 touched on March 13.

Commodity currencies failed to capitalise on the softer greenback with the Australian, New Zealand and Canadian currencies all losing a bit of ground and placing them among the weakest performers in the G10 space.

The Aussie dollar eased to $ 0.7847, pulling further away from a two-month high of $ 0.7939. It was not helped by volatile commodity prices and worries about slowing growth in China, Australia’s biggest trading partner.

(Reporting by Ian Chua; Editing by Chris Reese)