* Dollar index hits 16-mo low; dlr/swiss franc record low
* Euro turns higher vs dollar despite new periphery fears
* Dollar below 200-day MA vs yen; QE2 seen staying put
* Buying short dated USD/JPY seen a good trade
(Updates prices, adds quotes, graphics)
By Julie Haviv
NEW YORK, April 14 (Reuters) - The dollar dropped broadly on Thursday, reaching a record low against the Swiss franc, with more weakness likely so long as U.S. Federal Reserve and European Central bank policies continue to diverge.
U.S. economic numbers kept intact expectations the Federal Reserve's $600 billion asset-buying program will stay in place until June. [ID:nN14146589]
The Fed's second round of quantitative easing, called QE2, has been a bane for the U.S. dollar as it is tantamount to printing money.
The euro, in contrast, remains supported by the prospect of higher interest rates in the euro zone despite comments by Germany that Greece may need to restructure its debt [ID:nLDE73C28V].
Top ECB policymakers sent fresh warnings about rising euro zone inflation risks on Thursday, with one likening the current economic situation to that at the start of the bank's last rate hike cycle in 2005. The ECB raised rates to 1.25 percent last Thursday. [nLDE73D1EW]
The ICE Futures' dollar index dropped to a fresh 16-month low at 74.617 <.DXY>. In early afternoon, it was down 0.4 percent at 74.714.
"Despite the turmoil in Egypt, Libya and all of the other shocks, the euro still managed to move higher," said Rob Bogucki, head of FX North American trading at Barclays Capital in New York.
The euro has gained 8.3 percent on the dollar in 2011 even with events that would typically be negative for the currency, such as uprisings in the Middle East and Japan's earthquake.
In early afternoon New York trading, the dollar fell 0.5
percent against the Swiss franc
The dollar fell against the yen, trading down 0.6 percent
at 83.38 yen
The euro was up 0.3 percent at $1.4484
"The dollar remains under pressure without a doubt. Even though we have these headlines on Greece, it's not necessarily harming the euro," said John McCarthy, director of currency trading at ING Capital Markets in New York.
"The market to some extent is ignoring these headlines or investors simply believe Europe can solve its problems. People are just selling dollar on rallies and buying euros on dips."
One trader cited real money offers above 83.50 yen with further falls likely to target the 100-day moving average at around 82.72 yen.
The greenback's losses pushed it below its 200-day moving average near 83.43 yen as investors cut sizable long positions built after the U.S. currency's speedy ascent from its record low of 76.25 in March.
The dollar, in particular, was badly hit by U.S. initial jobless claims, which were higher than expected in the latest week. See [ID:nN14146589].
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Graphic - http://r.reuters.com/jek98r
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While investors appear intently focused on Fed rhetoric in recent weeks, economic data flow has comparatively flown under the radar.
Todd Elmer, G10 strategist at CitiFX in New York, said Friday's U.S. consumer price index reading could see a break in this pattern since there appears to be the risk of a relatively large surprise.
"Furthermore, we believe that strength would represent the bigger 'shock' to the market," he said. "Transmission from such a shock is likely to be strongest on USDJPY, so we see value in leveraging the recent dip to add short-dated upside via options."
(Additional reporting by Gertrude Chavez-Dreyfuss; Editing by Andrew Hay) ((julie.haviv@thomsonreuters.com; +1 646 223 6153; Reuters Messaging: julie.haviv.reuters.com@reuters.net))