* Euro turns higher vs dollar in choppy trading
* Dollar index hits 16-month low
* Dollar below 200-day MA vs yen; QE2 seen staying put
* U.S. jobless claims higher than expected (Recasts, updates prices, adds quote)
By Gertrude Chavez-Dreyfuss
NEW YORK, April 14 (Reuters) - The dollar fell on Thursday in choppy trading and further losses were seen as likely, hurt by reported central bank selling amid a backdrop of low U.S. interest rates that were not expected to rise any time soon.
Recent U.S. economic numbers, including jobless claims and retail sales, have come in on the soft side, which kept intact expectations the Federal Reserve's $600 billion asset-buying program would stay in place until June.
The ICE Futures' dollar index dropped to a fresh 16-month low at 74.617. At midday, it was down 0.2 percent at 74.827.
The euro, in contrast, remained supported by the prospect of higher interest rates in the euro zone despite the re-emergence of peripheral debt issues. Central banks were said to be buyers of the euro against the greenback as they looked to recycle their dollar proceeds in their reserves.
"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."
The yen, meanwhile, continued its broad surge as investors pared short positions on the Japanese currency, which has tumbled the last few weeks after G7 intervention last month.
The dollar, in particular, was badly hit by the yen's strength, especially following data on U.S. initial jobless claims, which were higher than expected in the latest week.
"The data ... errs on the softer side, and there is nothing here to change a view that the yen will be the beneficiary of any data that pushes Fed hikes further into the future, especially on a day when squeezes on yen crosses is the key," said Alan Ruskin, global head of FX strategy at Deutsche Bank.
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.
In midday trading, the dollar fell against the yen, trading down 0.7 percent at 83.25 yen.
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.
Goldman Sachs in a monthly report kept its forecasts for dollar/yen unchanged, with the pair seen rising to 90 yen in 12 months. Overall, Goldman remained bearish on the dollar with the U.S. bank targeting euro/dollar to rise to $1.50 in 12 months.
The euro was up 0.1 percent at $1.4459 in volatile trading. It was trading lower earlier following a resurgence of sovereign debt fears.
German Finance Minister Wolfgang Schaeuble acknowledged officially for the first time on Wednesday that Greece may have to restructure its debt, a move that European Central Bank Executive Board member Lorenzo Bini Smaghi said would be a catastrophe.
Later on Thursday, a high-ranking German government official did damage control, saying Schaeuble's comments made in a newspaper do not signal a change in Germany's position on a possible restructuring of Greek debt.
Traders said the fall below $1.4450 in euro/dollar triggered stop-loss orders and accelerated selling after it had earlier failed to test Wednesday's 15-month peak of $1.4521 and an options barrier at $1.4530. In early New York trading, support was seen around $1.4250-80, the base formed before last week's euro-zone rate hike pushed it higher. (Editing by Jan Paschal)