FOREX-Dollar falls for 5th straight day; Aussie rallies
* Dollar hits seven-week low, index down 0.4 percent
* Chinese trade data drives rally in Aussie dollar
* Bank of Japan leaves its policy on hold, as expected
NEW YORK, Aug 8 (Reuters) - The dollar dropped against major currencies on Thursday for a fifth consecutive session, as recent economic data and comments from Federal Reserve officials stoked uncertainty about when the U.S. central bank will begin reducing its stimulus.
The Australian dollar rallied after China trade data suggested the world's second-largest economy was stabilizing after more than two years of slowing growth. China is a major export destination for Australia.
Although most analysts expect the U.S. dollar to resume strengthening toward the end of the year, uncertainty about when the Fed may scale back its $85 billion per month bond-buying program should keep the currency under pressure.
This week, some policy makers suggested the Fed could start to scale back its monthly bond buying as soon as September, but this will depend on further improvement in the jobs market. Data last Friday showed U.S. employers slowed their pace of hiring in July.
"We expect that as the Fed moves toward 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.
The dollar index, which measures the currency's value against six other major currencies, fell 0.3 percent to 81.013, having earlier hit 80.868 - its lowest since June 19.
Against the yen, the dollar hit a low of 95.79, according to Reuters data, also a seven-week low, before rebounding to 96.69 yen, up 0.4 percent on the day.
The yen showed no immediate reaction after the Bank of Japan kept its monetary policy on hold, as expected.
The dollar extended losses against the yen after U.S. data showed the number of Americans filing new claims for jobless benefits rose slightly last week, but was near its lowest since before the 2007-09 recession, a hopeful sign for the U.S. economy.
Traders cited major support in the 95 yen level followed by 93.78 yen, the June low.
"The reasons for buying dollar/yen including Fed tapering and BoJ easing remain intact but at this stage, we would prefer to wait for the currency pair to stabilize and start to turn higher before buying," said Kathy Lien, managing director at BK Asset Management in New York.
The euro was up 0.4 percent at $1.3384, having hit a seven-week high of $1.3400, helped by figures showing an above-forecast German trade surplus and by Wednesday's much stronger-than-expected German factory data.
"The recent strength in the euro is likely attributed to signs of stabilization in the fundamental data pointing to an improving outlook," Sutton said.
The shrinking of the European Central Bank's balance sheet as well as ECB President Mario Draghi's stable tone have induced a round of short covering in the euro, but the euro will still likely end lower by year-end at $1.25, she said.
The Australian dollar rose 1.2 percent to $0.9111. The Canadian dollar also rallied against the U.S. currency to $1.0322.
China's exports rose 5.1 percent in July from a year ago, a smart turnaround from their first fall in 17 months in June. Analysts had expected a 3 percent rise. Imports jumped 10.9 percent from a year earlier, more than five times what analysts had forecast.