* Euro shrugs off higher-than-expected euro zone CPI data
* U.S. core consumer prices contained
* Dollar/yen on pace for worst week in 9 months
(Updates prices, adds quote, changes byline)
By Julie Haviv
NEW YORK, April 15 (Reuters) - The euro succumbed to sovereign debt fears on Friday, but the single-currency should remain range-bound or even rebound against the dollar as loose U.S. Federal Reserve monetary policy goes head-to-head with a hawkish European Central Bank.
Peripheral sovereign debt concerns have mostly been outweighed by rate expectations this year, but nevertheless the euro has suffered from setbacks along the way, with Friday no exception after Moody's cut Ireland's rating to just above "junk" status. [ID:nLDE73E0DU]
In early afternoon New York trading, the euro
Traders said market ran stop orders below $1.4430, pushing the euro to session lows at $1.4407 on electronic trading platform EBS.
The options market suggests euro zone debt worries are not
at the forefront of investors' minds. Benchmark volatilities
implied by one-month at-the-money euro/dollar options
Six-month
Several top Federal Reserve officials have sounded reassuring about inflation, and data on Friday supported that stance. For Fed comments, click on [ID:nN14167673].
Data showed U.S. core consumer prices for March were contained, suggesting the Fed was still a long way away from tightening monetary policy. [ID:nN15209781] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ For graphic on core CPI vs. University of Michigan 5-year inflation expectation index: http://r.reuters.com/dyp98r
U.S. inflation: http://r.reuters.com/jap98r ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
To many economists the data affirmed expectations that the Fed would not raise rates until early next year.
The ECB. meanwhile, raised rates to 1.25 percent from 1 percent last week, its first rate hike since July 2008.
Euro zone inflation numbers surprised on the upside, reinforcing views the ECB will continue to raise rates in the coming months. [ID:nBRLFFE7CY]
"A year from now, the ECB may have navigated the exit from accommodative policies, at the point at which the FOMC (Federal Open Market Committee) will be about to raise rates," said Jens Larsen, chief European economist at RBC Capital Markets in London.
"If the ECB hike does not cause a significant slowing of growth in the euro area, or a sharp deterioration in the periphery, then the pre-emptive strategy may well be judged successful."
Investors are pricing in the chances of two more ECB rate
increases before the end of this year
"The interest rate differential argument has clearly supported the euro the last few weeks," said Greg Salvaggio, senior vice president for capital markets at Tempus Consulting in Washington.
"The ECB has hiked rates and will probably hike again by the end of the summer and now the question is what will the Fed do. Clearly this benign inflation data that we got this morning won't push the Fed quickly to hike rates."
Market players said the euro could find the going tough above $1.45 given concerns about sovereign debt problems, which escalated this week as fears about a possible Greek restructuring intensified. [ID:nLDE73D0XQ]
The U.S. stock market. meanwhile, is reflecting a "risk-on" stance, with the Standard & Poor's <.SPX > 500 stock index up 5 percent this year.
Charles Schwab Corp
The dollar was down 0.4 percent at 83.12 yen
(Additional reporting by Gertrude Chavez-Dreyfuss in New York; Editing by Diane Craft)