FOREX-Dollar rises on inflation data, resumes rally after pullback

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* Graphic: World FX rates in 2019 (Recasts, updates prices, adds analyst quotes)

By Kate Duguid

NEW YORK, Feb 13 (Reuters) - The U.S. dollar rose modestlyon Wednesday after a measure of inflation excluding energyprices rose, prompting the greenback to reverse the prior day'spullback.

The Labor Department reported that its Consumer Price Indexwas unchanged for the third straight month in January, held downby cheaper gasoline.

In the latest 12-month period, the so-called core CPI rose2.2 percent for a third straight month. Evidence of inflationcan increase the value of the dollar by raising expectationsthat the Federal Reserve will tighten monetary policy.

The dollar fell on Tuesday as investors put money in riskierassets on rising hopes of a breakthrough in U.S-China tradetalks.

Risk appetite remained elevated on Wednesday - as seen ingains to the S&P 500 index .DJI and the Dow Jones IndustrialAverage .DJI - yet the morning's inflation print neverthelesskept the safe-haven dollar afloat.

"I don't think people really know what to do with thedollar. There's not a lot of conviction," said Mark McCormick,North American head of foreign exchange strategy at TDSecurities.

The dollar index rose by 0.42 percent to 97.120 .DXY . Itstood at $1.127 against the euro EUR= , about half a percentstronger.

The New Zealand dollar and Sweden's crown rose after theircentral banks broke with the growing caution of the world'smajor monetary-policy makers, surprising traders who hadexpected more dovish signals.

The kiwi was the stand-out performer after the neutral toneof the Reserve Bank of New Zealand's policy announcement, whichcame as risk assets rallied.

The Swedish crown stormed higher after the Riksbank said theeconomic outlook had not changed much since December and itwould stick to its plan to lift interest rates in the secondhalf of 2019.

"Most of the gains we saw in the currency market overnightwere in the Kiwi dollar and the Swedish crown which reallyreflect more idiosyncratic issues than broader market trends,"said Shaun Osborne, chief foreign exchange strategist at ScotiaCapital.

The kiwi NZD= was last up about 1 percent to $0.680.Sweden's crown rose 0.47 percent against the euro to 10.440 EURSEK= and 0.02 percent versus the dollar to 9.261 SEK= .

(Reporting by Kate Duguid and Tommy Wilkes; Editing by DavidGregorio and Grant McCool) ((; +646-223-6118; ReutersMessaging:

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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