GLOBAL MARKETS-Shares rise, dollar softens after data dampens prospects for early Fed tapering
early Fed tapering@
* Dlr defensive after jobs data weakens hopes of early Fed tapering
* European shares hit 2-mth high, tracking Wall Street gains
* NZ dlr plunges on food safety scare affecting top exporter
* Aussie hits 3-yr low ahead of likely rate cut by RBA
LONDON, Aug 5 (Reuters) - The dollar softened and European shares edged up to a two-month high on Monday after last week's batch of U.S. data left investors less sure the Federal Reserve would start to scale back its stimulus next month.
The biggest mover in the currency market, though, was the New Zealand dollar, which slumped to a one-year low following revelations of a milk power contamination scare from Fonterra , the world's biggest dairy products exporter.
European shares started 0.4 percent higher following a record close on Wall Street last Friday when the latest U.S. jobs report undermined hopes the Fed would begin to trim its $85 billion a month in bond purchase as soon as next month.
"I suspect those hoping for a taper in September will be disappointed," said Michael Ingram, market commentator at BGC.
As investors trimmed dollar holdings on the changing outlook, the greenback fell 0.6 percent to 98.32 yen and the euro firmed slightly to $1.329, clinging to its gains from Friday, when it rose 0.5 percent versus the dollar.
"It looks like we're in for a slightly choppy and frustrating time as the market tries to get some clarity on the Fed and what might happen in September," said Simon Smith, chief economist at FXPro.
U.S. 10-year T-notes traded at a yield of 2.611 percent , still below Friday's high of 2.749 percent, which was just below a two-year high of 2.755 percent hit in July.
The New Zealand dollar hit a low of $0.7670 to reach lows not seen since June 2012 on the brewing milk powder scandal.
China said it halted imports of dairy products from New Zealand after New Zealand dairy exporter Fonterra said at the weekend it had found bacteria in some of its products that could cause botulism.
"It's a pretty serious development for New Zealand given how important dairy is. But what usually happens with these food quality issues is that as details come out, people tend to feel more reassured," said Chris Tennent-Brown, FX economist at the Commonwealth Bank in Sydney.
The Australian dollar also slipped sharply, to a three-year low of $0.8848, after the country's retail sales data fell short of market forecasts and reinforced expectations of further rate cuts by the Reserve Bank of Australia (RBA).