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Written by: Staff

LONDON, Mar 16 (Reuters) The dollar hit a six-week low against the euro and Treasuries firmed on Thursday after tame U.S. inflation data further dampened expectations about how far the Federal Reserve will raise interest rates.

U.S. consumer prices rose a modest 0.1 per cent in February, both overall and excluding volatile food and energy costs.

Economists had expected core prices to rise 0.2 per cent and the lower reading was taken as further evidence the Fed might stop raising rates, currently at 4.75 per cent, after one more hike.

''The CPI goes hand-in-hand with the Fedspeak and what looks to be planted stories out of the FOMC in the last several days that takes 5.25 per cent and 5.50 per cent off the table,'' said Greg Anderson, senior foreign exchange strategist at ABN AMRO in Chicago.

Separately, data showed a fall in U.S. housing starts and a modest rise in weekly jobless claims.

The dollar pared earlier gains against the yen, while the euro rose a third of a per cent against the dollar to touch a six-week peak of $1.2115 after the data.

The yield on benchmark 10-year Treasuries fell to 4.71 per cent from 4.75 per cent ahead of the data, while U.S. stock index futures erased losses and turned mildly positive as markets scaled back their expectations for where U.S. rates will peak.

The FTSEurofirst 300 was flat at 1,368 points, hovering near Wednesday's 4-1/2 year highs as investors digested the latest slew of results from companies including insurers Prudential and Allianz, and utility Gaz de France.


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