FOREX-Dollar sinks to new low vs franc; struggles vs euro

* Economic data hints at a slowing U.S. recovery

* Euro falls from 4-week high

* Safe-haven bids support Swiss franc, yen (Updates prices, details)

NEW YORK (Reuters) – The dollar skidded to an all-time low against the Swiss franc on Wednesday and struggled against the euro after poor manufacturing and employment data stoked expectations that U.S. interest rates will remain low for longer than markets have expected.

Optimism that Greece will avoid restructuring its massive debt load initially supported the euro, driving it to a four-week high against dollar, though it surrendered gains as investors found nothing concrete to drive it higher.

A private sector report on Wednesday showed U.S. private employers added only 38,000 jobs in May, while separate data showed output in the manufacturing sector slowed to its lowest level since 2009.

“Economic indicators continue to show the economy is re-entering a downward spiral,” said Douglas Borthwick, managing director at Faros Trading in Stamford, Connecticut.

“Beginning with housing numbers, joined by local manufacturing data and now today with employment numbers, we believe the U.S. economy is hitting the brakes at exactly the wrong time for the Federal Reserve,” he said. “The USD has no choice but to weaken given exports are the only bright spot in the U.S.”

The dollar fell against the franc to record low of 0.8383 and was last down 1.4 percent at 0.84168 francs.

The European Central Bank raised rates in early April and several more increases are expected this year to combat inflation. Rate differentials are a primary reason for the euro’s 7.5 percent gain against the dollar this year.

Wednesday’s private payrolls data hints at a weak U.S. Labor Department nonfarm payrolls report on Friday, a key monthly driver of financial markets given jobs growth is one of the Federal Reserve’s two mandates.

The Swiss franc benefited from its safe-haven appeal and from upbeat readings on the Swiss manufacturing and retail sectors.

The euro also hit a record trough versus the Swiss currency at 1.2085. It last traded at 1.2110, down 1.5 percent.

Against the yen, which also benefited from its safe-haven appeal, the dollar was down 0.8 percent at 80.90 yen .

The euro first rose Wednesday as Greece neared a deal with the European Union and International Monetary Fund Wednesday to avert a near-term default but later fell as the New York session wound down.

The single-currency hit a four-week high of $1.4459 on electronic platform EBS but then fell as low as $1.4368.

In mid afternoon New York trade, the euro was little changed at $1.4386. A UK trader said there was protective selling ahead of $1.44550 barriers, with more sell orders toward $1.4480 ahead of huge barrier option at around $1.4500.

Sources close to talks between Athens and inspectors from the European Commission, European Central Bank and IMF said they expected the latest review of Greece’s fiscal progress to be completed by Friday.

A source told Reuters on Wednesday that whether Athens gets the fifth, 12 billion euro tranche of aid under its 110 billion euro EU/IMF bailout will depend on a meeting of senior EU finance officials under way in Vienna and also on a meeting of euro zone finance ministers to be held soon.

The euro was dented after German newspaper Frankfurter Allgemeine Zeitung said it is now considered certain that the IMF will not pay its share of a fifth tranche of aid to Greece at the end of June. It did not cite any sources.

“A deal for Greece would be a temporary stopgap that pushes the day of reckoning further down the road,” said Lee Hardman, currency strategist at BTM-UFJ. “We think the euro is overvalued given the weak fundamentals in the euro zone and believe levels above $1.45 will be aggressively sold into,” he added.