FOREX-Dollar falls, poised to end flat on week

    * Dollar's recovery fizzles as euro regains upper hand
    * ECB's Draghi sees need for new 'fiscal' tool to fight
crisis
    * Swedish crown on track for best week vs euro in over 8
years

 (Updates market action, changes dateline; previous LONDON)
    By Richard Leong
    NEW YORK, May 11 (Reuters) - The dollar fell for a third day
on Friday against a basket of currencies as traders booked gains
on its recent run-up tied to the widening interest rate gaps in
favor of the United States and signs of cooling growth in the
rest of the world.
    The euro rose for a second day as the greenback retreated
further from a 2018 peak reached earlier this week. The single
currency, however, was still on track for a loss for a fourth
straight week against the dollar.
    "People are taking profits. The move is losing some steam,"
Chuck Tomes, senior investment analyst at Manulife Asset
Management in Boston, said of the dollar's rise that started in
mid-April and Friday's profit-taking. 
    At 11:22 a.m. (1522 GMT), an index that tracks the dollar
versus six currencies was down 0.05 percent at 92.603. It
hit its strongest level of the year at 93.416 on Wednesday.
    The dollar index was poised to end flat on the week,
snapping three straight weeks of gains.
    The euro scored a 0.2 percent gain at $1.1935 and a
0.25 percent rise against the Japanese currency at 130.59 yen
.
    On the week, the common currency was set to fall 0.15
percent against the greenback and to eke out about a 0.08
percent gain versus the yen.
    A loss of economic momentum in Europe has made policymakers
in Europe and Britain more cautious about ending 2008 financial
crisis-era policies. 
    On Friday, ECB President Mario Draghi said the euro zone
needs a new "fiscal instrument" to help weaker member nations if
they are being overly penalized by investors during a debt
crisis.
    Traders pushed out expectations of a U.K. rate hike to
end-2018 and the European Central Bank boosting interest rates
in the second half of 2019.
    U.S. interest rates futures implied traders expect the U.S.
Federal Reserve to raise key borrowing costs at least twice more
in 2018.
    "We are finally starting to see the dollar rise meaningfully
and I think this move has further legs to run given the
divergence in monetary policy trends between U.S. and Europe,"
said SEB senior currency strategist Richard Falkenhall, who
expects the euro to weaken to about $1.15.
    Not all European central bankers seemed willing to keep
policy loose. 
    Earlier this week, several policymakers at Riksbank signaled
the possibility of higher interest rates in the fall amid a
surging economy, helping to spark a rally in the Swedish crown.

    The Swedish currency gained 0.6 percent at 9.5968
crowns per dollar, putting on track for the best weekly gain
versus the greenback since late June 2017. It was on course for
its strongest weekly increase versus the euro since
February 2010, Reuters data showed.
========================================================
    Currency bid prices at 11:27AM (1527 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
                                              Session                                           
 Euro/Dollar      EUR=        $1.1935        $1.1913     +0.18%         -0.51%      +1.1968     +1.1892
 Dollar/Yen       JPY=        109.3900       109.3800    +0.01%         -2.91%      +109.5600   +109.1600
 Euro/Yen         EURJPY=     130.56         130.34      +0.17%         -3.42%      +130.6800   +130.0100
 Dollar/Swiss     CHF=        1.0003         1.0031      -0.28%         +2.67%      +1.0039     +0.9977
 Sterling/Dollar  GBP=        1.3541         1.3516      +0.18%         +0.21%      +1.3595     +1.3502
 Dollar/Canadian  CAD=        1.2791         1.2765      +0.20%         +1.70%      +1.2799     +1.2729
 Australian/Doll  AUD=        0.7537         0.7532      +0.07%         -3.38%      +0.7566     +0.7523
 ar                                                                                             
 Euro/Swiss       EURCHF=     1.1942         1.1951      -0.08%         +2.16%      +1.1956     +1.1925
 Euro/Sterling    EURGBP=     0.8813         0.8811      +0.02%         -0.79%      +0.8821     +0.8789
 NZ Dollar/Dolar  NZD=        0.6956         0.6961      -0.07%         -1.83%      +0.6986     +0.6955
 Dollar/Norway    NOK=        7.9988         8.0012      -0.03%         -2.54%      +8.0178     +7.9720
 Euro/Norway      EURNOK=     9.5481         9.5353      +0.13%         -3.05%      +9.5580     +9.5102
 Dollar/Sweden    SEK=        8.5950         8.6495      -0.46%         +4.80%      +8.6625     +8.5693
 Euro/Sweden      EURSEK=     10.2599        10.3077     -0.46%         +4.28%      +10.3130    +10.2460
    

    
 (Additional reporting by Saikat Chatterjee, Tommy Wilkes in
LONDON
Hideyuki Sano in TOKYO; 
Editing by Louise Ireland and Dan Grebler)
  

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