* US dollar falls on dovish comments from Fed's Bullard
* ECB's Trichet, Paramo talk about exit strategy
* Dollar hits 6-week low vs yen; high-yielders rise
* Euro zone services grow at fastest pace in 2 yrs-survey (Updates prices, adds comments, changes byline, dateline; previous LONDON)
By Gertrude Chavez-Dreyfuss
NEW YORK, Nov 23 (Reuters) - The U.S. dollar weakened broadly on Monday, hitting a six-week low against the yen after a Federal Reserve official affirmed expectations U.S. interest rates would stay low for some time.
A low Fed funds rate would limit returns on many U.S. investments, prompting investors to diversify out of the currency and seek other, riskier assets with higher yields.
St. Louis Federal Reserve President James Bullard said on Sunday the Fed should keep alive its mortgage-related assets purchase program beyond a planned end date to help stimulate the economy. For the story click on [ID:nN22246631].
"It's a more tentative risk-seeking environment due to mixed flows into year-end central bank talk, such as those of Bullard's," that want to extend MBS purchases into year-end, said Amelia Bourdeau, senior currency strategist at UBS in Stamford, Connecticut.
That has kept the dollar under pressure, she added.
In contrast, both European Central Bank President Jean-Claude Trichet and executive board member Jose Manuel Gonzalez Paramo discussed plans about exiting its quantitative strategy. On Monday in Madrid, Trichet said that as the situation becomes more normal, the focus in the medium term calls for a "gradual and timely phasing out of these measures." [ID:nGEE5AM1L9].
Paramo, meanwhile, said on Sunday the ECB could detail plans for phasing out its quantitative easing at the December meeting. For the story, see [ID:nGEE5AL04Z].
Both remarks have boosted the view that the ECB is likely to exit its easing strategy ahead of the Fed, underpinning the euro against the dollar.
Selling in the dollar came as oil rose and gold prices hit record highs. Analysts also said moves were exacerbated by thin liquidity with Tokyo markets shut and ahead of Thursday's U.S. Thanksgiving holiday.
GROWTH IN EURO ZONE SERVICE SECTOR
In early New York trading, the euro was up 0.9 percent at
$1.4990
The euro was supported after a key survey showed the euro zone's service sector grew at its fastest pace in two years in November, suggesting an economic recovery will continue in the fourth quarter, albeit at a slower rate. [ID:nGEE5AM0RG]
The ICE Futures dollar index <.DXY> dropped 0.85 percent to 75.005, off a two-week high of 75.879 hit on Friday.
Expectations have been growing that the Fed funds rate will stay essentially at zero well into 2010, even as rates in other countries rise, and this has contributed to the dollar's steady decline since March.
Against the yen, the dollar fell 0.2 percent to 88.77 yen
Gold prices
Higher gold and oil prices boosted riskier commodity-linked
currencies, with the Australian
The U.S. dollar also fell 1.3 percent against the Canadian
dollar to C$1.0581
"As we look ahead, divergence in central bank policy will be a key driver in FX markets - there are a lot of liquidity issues here. It's not just about interest rates," said Ned Rumpeltin, currency strategist at Nomura in London. (Additional reporting by Naomi Tajitsu in London; Editing by Padraic Cassidy) ((gertrude.chavez@thomsonreuters.com; +1 646 223 6322; Reuters Messaging: gertrude.chavez.reuters.com@reuters.net))