GLOBAL MARKETS-Dollar off on Fed unease; China data puts floor under stocks
* Trade growth eases fears over slowdown in China
* Wall St turns lower, Europe's shares resume 6-week rally
* Treasury yields hit lowest in a week
* Dollar at 7-week lows on Fed tapering bets
NEW YORK, Aug 8 (Reuters) - The dollar fell to a seven-week low on Thursday, while bond yields declined as investors reversed trades that had been fueled by speculation of when the Federal Reserve will start to remove its stimulus.
U.S. stocks were little changed at midday, drawing some support from Chinese data showing a surprisingly strong rise in exports and imports in July. The trade data eased fears that a slowdown in the world's second largest economy would threaten the improving outlook in Europe and the still-fragile U.S. recovery.
Investors remain focused on gauging when the Fed will start to reduce its $85 billion in monthly asset purchases, which has been a major driver of the rally in equities this year.
While the possibility of a reduction in bond buying would typically push Treasury yields higher, yields fell to their lowest level in a week on Thursday, driven by technical trading in what is typically a lower volume time for the market.
Bond prices were also boosted by improved appetite for U.S. government debt ahead of a $16 billion auction of 30-year debt.
Ten-year U.S. Treasury notes were up 8/32 in price to yield 2.580 percent. The 10-year yield hit 2.573 percent earlier, the lowest level since July 31, according to Reuters data.
Although most analysts expect the dollar will resume gains toward the end of the year, uncertainty about when the Fed may act kept the currency under pressure as investors unwound some cross-asset trades.
Substantial selling in the bond market has ebbed since the U.S. government reported jobs data for July that fell short of expectations. Prices have risen and yields, which move inversely to price, have climbed as some funds cover short trades that generally involved buying Japanese stocks and shorting the yen and the Treasury market.
"We expect that as the Fed moves towards tapering, with September our base case ... the dollar will retrace some of this lost ground and most currencies will weaken into year-end," said Camilla Sutton, chief currency strategist at Scotiabank in Toronto.
Some Fed policymakers suggested this week that the U.S. central bank could scale back on bond purchases as soon as September, but a reduction will depend on continued improvement in the jobs market.
The dollar languished at seven-week lows against other major currencies, with the dollar index dropping 0.5 percent, while the euro rose 0.4 percent to $1.3390.
Stocks on Wall Street were little changed after three days of declines as investors took profits following last week's record highs.
The Dow Jones industrial average slipped 21.85 points, or 0.14 percent, to 15,448.82. The Standard & Poor's 500 Index edged up 1.45 points, or 0.09 percent, at 1,692.36. The Nasdaq Composite Index was off 13.18 points, or 0.36 percent, to 3,667.19.
In the United States, the number of Americans filing new claims for jobless benefits rose slightly last week but was still near its lowest level since before the 2007-09 recession.
"If we end lower, this would be the first four straight days of losses this year. We've had this tremendous rally this year so the market is just taking a breather, digesting the good earnings season winding down," said Ryan Detrick, senior strategist at Schaeffer's Investment Research in Cincinnati.
European shares on the FTSEurofirst 300 provisionally closed up 0.2 percent. Material stocks, which cover metals and basic resources, were the second largest booster to the index after financials, after the Chinese trade data eased concerns about slowing growth in the world's largest consumer of metals.
MSCI's world equity index rose 0.5 percent.
Oil investors overlooked the Chinese data, sending crude prices lower on rising supplies from the North Sea. Brent crude fell $1.05 to $106.39 per barrel, while U.S. crude dropped $1.74 to $102.63.