FOREX-Dollar firms broadly, bolstered by robust U.S. retail sales

Thu Dec 12, 2013 4:46pm EST

Related Topics

* U.S. retail sales rise; jobless claims weaker than expected

* Euro near 2013 peak against dollar, five-year peak vs yen

* Swedish crown off as Riksbank cut seen certain after data

* Aussie dollar falls to lowest since late August

By Gertrude Chavez-Dreyfuss

NEW YORK, Dec 12 (Reuters) - The dollar firmed across the board on Thursday, helped by an upbeat U.S. retail sales report that suggested the recovery of the world's largest economy is on a stable footing.

That report, however, does not alter expectations as to how soon the Federal Reserve will begin reducing its economic stimulus, analysts said. Market participants still expect the Fed to pare back its asset purchases no later than March 2014 and this has been reinforced after Thursday's weaker-than-expected U.S. jobless claims data.

"The Fed is still going for a tapering in the first quarter of the year. They would have to wait for more good economic numbers to come into year-end before they do anything," said David Pierce, director of business development for FX broker GPS Capital Markets in Salt Lake City, Utah.

U.S. retail sales rose 0.7 percent in November, while initial jobless claims rose 68,000 to 368,000 last week, the largest weekly increase November 2012.

"The strong U.S. retail sales number was definitely a positive factor for the dollar. This could lead to some upward revisions in the gross domestic product for the fourth quarter," said Brian Dangerfield, currency strategist at RBS Securities in Stamford, Connecticut.

The rise in jobless claims was a result of seasonal factors given last week's big drop due to the Thanksgiving holiday, he added.

"I think the market is looking at today's outsized increase in jobless claims as not necessarily an indication of a weakening U.S. labor market," he said.

In midday trading, the dollar index rose 0.34 percent to 80.16, rebounding after three days of losses.

The euro dipped 0.2 percent against the dollar to $1.3755 , threatening to end a seven-session streak of gains. It has gained nearly 4 percent since Nov. 11 and is close to its 2013 peak of $1.3832.

The dollar advanced 0.9 percent against the yen to 103.35 , rising after two straight days of losses. The euro also gained, up 0.6 percent at 142.16 yen, not far from a five-year peak of 142.17 yen.

The Australian dollar fell sharply to US$0.8914, its lowest since Aug. 30, hurt by comments from Reserve Bank of Australia Governor Glenn Stevens saying that he prefers the Aussie dollar to trade closer to US$0.85. The Aussie was last at US$0.8936, down 1.25 percent.

He told the Australian Financial Review that a weaker currency rather than lower interest rates would be a preferable measure to ease financial conditions in Australia.

SWISS FRANC COOL TO SNB

The Swiss franc earlier rose against the euro, helped by year-end flows into safe-haven Switzerland. It shrugged off comments from the Swiss National Bank, which reiterated its commitment to the euro/franc peg of 1.20 euros.

The euro fell to a seven-month low of 1.2197 francs , but by late New York trade, the single euro zone currency was up 0.1 percent at 1.2231 francs. The dollar, on the other hand, climbed 0.3 percent to 0.8893 franc .

"Investors are concerned about the impact on risk appetite of Fed tapering and this could underpin the Swiss franc," said Jane Foley, senior currency strategist at Rabobank.

"Also, given the recent increase in disinflationary pressures in the euro zone, it seems likely that ECB interest rates will also remain at rock bottom for longer. This indicates that there is less reason for euro/Swiss to appreciate soon," she said.

The Swedish crown was also a big mover of the day, falling to a 1-1/2-year low against the euro after data bolstered the case for a rate cut by Sweden's Riksbank. The euro, however, remained supported by higher money market rates and year-end repatriation by banks.

The Swedish crown fell to its lowest since May 2012 at 9.0978 crowns per euro after inflation data showed falling price pressures with jobless numbers also painting a grim picture about the Swedish economy.

"The market is extrapolating the data will see some action from the Riksbank next week. This is driving down the crown," said Jeremy Stretch, head of currency strategy at CIBC World Markets in London.

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