* Dollar firms against yen, reverses post-payrolls fall
* Euro prodded higher by ECB's Nowotny
By Curtis Skinner
NEW YORK, Jan 14 Robust U.S. retail sales data
and a record Japanese current account deficit fueled the U.S.
dollar's rally against the yen on Tuesday, while mixed signals
from European central bankers kept the euro in check.
The greenback rebounded after two days of losses after the
Commerce Department said U.S. consumers spent more than expected
in December, countering last week's tepid jobs report.
"If anything, overall consumer spending and final demand are
picking up at the margin, which is at odds with the weak
payrolls figures reported last week," said Matthew Derr, FX
strategist at Credit Suisse in New York.
"We view the payroll figures as an anomaly and today's data
seems to bolster that case. As a result, we remain bullish on
In afternoon trading, the dollar was up 1.17 percent to
104.18 yen, recovering from a more than 1 percent drop on
Monday that took it to a one-month low.
The yen's woes were compounded by data showing the Japanese
government posted a record current account deficit in November
as a bulging trade gap weighed on the country's balance of
"From our perspective, the trend for the yen remains clear,"
said Jens Nordvig, global head of currency strategy at Nomura
Securities in New York.
"Weak trade-related flows combined with increasing asset
allocation by Japanese investors to foreign investments is a
cocktail that is likely to push the yen gradually weaker."
Most banks see a strong case for the dollar to rise this
year, given the contrasting outlooks for monetary policy in the
United States compared with Europe and Japan, whose central
banks are still considering more moves to support growth.
The U.S. Commerce Department said on Tuesday retail sales
excluding automobiles, gasoline, building materials and food
services - or core retail sales - increased 0.7 percent last
month versus a consensus estimate for a 0.3 percent rise.
November data was however revised lower.
Dallas Federal Reserve President Richard Fisher said on
Tuesday that he would continue to push for a paring of central
bank stimulus. The comments were in line with the strategy
adopted by the Fed last month when it cut its monthly bond
purchases by $10 billion and said that there would be further
The dollar was also slightly stronger against a basket of
major currencies made up of its largest trading partners. The
dollar index was up 0.13 percent at 80.62.
The euro earlier touched a two-week high against the dollar
after European Central Bank governing council member Ewald
Nowotny said euro zone growth may surprise on the upside,
contrary to concerns expressed by the ECB last week.
"After (ECB President) Mr. Draghi's comments last week, Mr.
Nowotny's comments represent conflicting signals and make one
cautious on buying the euro in response," said Valentin Marinov,
head of European G10 FX Strategy at Citibank in London.
"There may still be some room for the euro to be squeezed
higher but in the medium term we still see the risks to the
Still, euro zone November industrial production numbers also
struck a positive note. The euro traded up 0.08 percent
on the day at $1.3682.