Dollar extends losses vs euro after Greenspan

TOKYO, Dec 12 (Reuters) The dollar fell against the euro on Tuesday, extending losses made after former Federal Reserve Chairman Alan Greenspan warned investors to expect a few more years of dollar weakness.

Traders said the remarks were used as an excuse to sell the U.S.

currency after it rallied on upbeat jobs data that dampened expectations the Fed may have to trim interest rates early next year as the economy slows.

''People are putting this as a Greenspan-dollar-type move,'' said Luke Waddington, head of forex trading at Royal Bank of Scotland in Tokyo. ''I'm questioning whether that's right, and really this was a euro-yen, sterling-yen, cross-yen move.'' The euro stayed in sight of a record high against the yen on prospects for rates to keep rising in the euro zone, while softer data has helped to erode expectations for the Bank of Japan to bump up rates as early as next week.

In early Tokyo trade, the euro was at 154.75 yen just below the record high of 154.88 yen hit on Monday.

The low-yielding yen also hit fresh eight-year lows against sterling and the Swiss franc The euro rose to $1.3245 from around $1.3235 in late U.S. trade.

The dollar slipped to 116.85 yen from 117.00 yen.

Greenspan told a business conference in Tel Aviv via a video-link from Washington, ''I expect that the dollar will continue to drift downwards until there will be a change in the U.S. balance of payments.'' With Greenspan training the spotlight back on the huge trade gap, the market is eager to digest the monthly trade balance due at 1330 GMT.

A Reuters poll of 70 analysts gave a median estimate of a $63.0 billion deficit in October, narrowing slightly from a shortfall of $64.3 billion a month earlier.

The dollar fell for three straight years through 2004 partly due to the U.S. trade deficit, before the currency got a sustained boost from rising interest rates.

With the Fed widely expected to leave rates unchanged at 5.25 percent at a policy meeting later in the day, investors will scrutinise the post-meeting statement to see how worried the central bank is about inflation risks.

REUTERS DKS PM0616