* U.S. industrial output rises; housing starts falter
* Pound jumps after December sales surprise
* New Zealand dollar falls 1 percent vs dollar
By Curtis Skinner
NEW YORK, Jan 17 The dollar rose on Friday after
fresh U.S. data supported the view the world's largest economy
is improving enough to keep the Federal Reserve's
stimulus-reducing measures on track.
U.S. industrial output rose at its fastest clip in 3-1/2
years in the fourth quarter, data showed Friday. Separately,
groundbreaking for new homes last month dropped 9.8 percent, the
largest percentage decline since April, but housing starts were
coming off a multi-year high in November.
The dollar index, a gauge of the dollar's value versus six
major currencies, rose 0.2 percent to 81.056. In late
morning trading, the euro was down 0.4 percent against the
dollar to $1.3566, earlier touching a six-day low of
"Overall, the U.S. economy is making steady, if uneven,
progress and that should keep intact expectations for sustained
Fed tapering this year," said Joe Manimbo, senior market analyst
at Western Union Business Solutions in Washington.
"U.S. Treasury yields haven't budged much, so as long as
they hold near their elevated levels, that should continue to
underpin the dollar."
The British pound, meanwhile, was one of the biggest movers
of the day, rising 0.55 percent to $1.6443 following
strong UK retail sales data.
British retail sales spiked 2.6 percent in December to show
an annual rise in volumes of 5.3 percent - the fastest growth
since October 2004 - Office of National Statistics data showed
Whether the 5.3 percent annual jump points to a sustainable
recovery in Britain and more fuel for the pound is unclear.
Strong spending around Christmas may well have been chiefly on
credit and unless wages start to grow in real terms, the Bank of
England may be justified in sticking with ultra-low interest
rates well into next year.
The New Zealand dollar was pounded on Friday, falling more
than 1 percent on the day to US$0.8259.
The kiwi has been rallying in recent months on expectations
that the Reserve Bank of New Zealand was on the verge of raising
interest rates. But traders say some hedge funds have taken
profit on the kiwi's gains against the Australian dollar this
week by buying U.S. dollars.
"In our G-10 valuation table it is the New Zealand dollar
that now tops the list as the most over-valued currency," Bank
of Tokyo-Mitsubishi UFJ analyst Derek Halpenny said.
"Given how well priced an RBNZ rate hike is this year, we
would not expect strong buying from current levels if the RBNZ
does hike this year."