U.S. dollar falls, hurt by warning from Chinese official
* Dollar falls broadly, at record low vs Swiss franc
* China official sees risks in holding "excessive" US assets
* European shares snap four-day losing streak
* Brent crude back above $114 on dollar weakness
By Emelia Sithole-Matarise
LONDON, June 7 (Reuters) - The U.S. dollar fell broadly on Tuesday, hurt by a warning from a Chinese official of the risks in holding huge dollar assets while European equities rebounded as investors picked up beaten-down shares.
The weaker dollar helped Brent crude oil prices rise back above $114 a barrel though gains were limited by expectations that oil cartel OPEC will raise its production targets this week and worries that an economic slowdown will erode demand.
The greenback hit a one-month low against the euro and a record low versus the Swiss franc after a Chinese foreign exchange official said the dollar would continue to weaken against other major currencies and warned of risks in holding "excessive" U.S. assets. [ID:nB9E7EM022]
It slid 0.5 percent against a basket of major currencies to 73.556 .DXY, its lowest in a month, and plumbed 0.8328 Swiss francs CHF= on trading platform EBS -- a record low.
"China has been growing its share of U.S. securities quite aggressively in the past and the threat that they will be selling these holdings has always been there," said Adam Myers, senior forex strategist at Credit Agricole.
"This is not a credible threat as a sell-off will lead to a steepening of the U.S. yield curve which will hurt the U.S. and the Chinese, who are dependent on the U.S. economy. But I do agree that the dollar is headed lower in the long term."
U.S. debt prices were slightly weaker but this was largely due to the rebound in equities, with benchmark Treasury note yields up about three basis points at 3.024 percent US10YT=RR.
The dollar has been persistently weak in recent months due to worries about the solidity of the U.S. economic recovery and expectations that interest rates, most notably in the euro zone, will continue to be raised significantly faster.
The European Central Bank is expected at its meeting on Thursday to signal a second rise in rates this year, offsetting the impact on the euro of concerns that Greece will eventually have to restructure its debt.
The euro jumped to a one-month high of $1.4682 EUR=, up 0.6 percent on the day and up more than 4 percent since it bottomed out against the dollar on May 23.
Investors will look to a speech by Federal Reserve Chairman Ben Bernanke at 1945 GMT for more clues on the U.S. central bank's view of the economic slowdown and its impact, if any, on the Fed's exit from its extremely easy monetary policy.
MILD EQUITIES BOOST
European shares snapped a four session slide with investors picking up beaten-down stocks, notably in the utilities and basic resources sectors, though worries that the global recovery was stalling after a spate of weak U.S. data capped gains. The FTSEurofirst 300 .FTEU3 index of top European shares was up 0.3 percent, clawing back from an 11-week closing low on Monday.
The European advances helped world stocks as measured by MSCI .MIWD00000PUS up 0.2 percent, and followed gains in Asian markets.
"Shares in Asia were higher so that's giving us a mild boost and some people think the falls yesterday may have been a bit overdone," said Markus Huber, senior trader at ETX Capital.
U.S. stock index futures also pointed to a firmer open on Wall Street, with futures for the S&P 500 SPc1, Dow Jones DJc1 futures, and Nasdaq 100 NDc1 up 0.5-0.6 percent.
U.S. Federal Reserve officials on Monday said recent economic data has been disappointing, with one suggesting it could delay the Fed's exit from its extremely easy monetary policy.
Brent crude oil for July delivery LCOc1 edged back above $114 a barrel, bolstered by the dollar's weakness, but gains were muted on the possibility that OPEC might raise its output targets this week and worries about the demand outlook.
Earlier, Iraqi Oil Minister Abdul-Kareem Luaibi said world oil markets were well supplied and prices were not too high. The comments suggest Iraq may not support the increase in OPEC output that Saudi Arabia and other Gulf producers favour.
London Brent was last up 0.2 percent at $114.75, having fallen as low as $113.80 earlier.
Spot gold XAU= was bid firmer at $1,549.00 per ounce, after closing at $1,543.05 on Monday, boosted by the weaker dollar. Gold, one of the chief beneficiaries of worries about the security of currencies and other assets, set a record high of $1,575.79 per ounce in early May.