* Dollar recovers as U.S. retail sales halt slide in U.S.
* Yen weakens, Australian dollar also suffers
* Canadian dollar hits four-year low
By Anirban Nag
LONDON, Jan 15 The dollar index gained for a
second straight day on Wednesday, helped by firmer U.S. yields
that pulled the greenback away from a one-month low against the
yen and sent the Canadian dollar to a fresh four-year low.
Traders said U.S. yields , which
correlate with the dollar index, were helped by upbeat retail
sales. The data offset Friday's disappointingly soft payrolls
and halted a two-day slide in U.S. Treasury yields.
The dollar index was up 0.25 percent at 80.858, with
gains seen across the board. It was up 0.1 percent at 104.35 yen
, building on Tuesday's recovery, when it rallied more
than 1 percent to pull away from a near one-month low of 102.85.
The euro was down 0.4 percent against the dollar at $1.3625
while growth-linked currencies also weakened. The
Australian dollar fell 0.6 percent to $0.8910 while the
dollar rose to a four-year high against its Canadian counterpart
of C$1.0992. Option barriers were cited at C$1.10 which
were capping the dollar's rise for now, traders said.
"It is mostly a dollar move higher and we like the yen
weakening some more especially against the dollar," said Alvin
Tan, currency strategist at Societe Generale.
"The drop in the Canadian dollar is part of the U.S. dollar
strength story, though in the short term we feel that the
sell-off may have been a bit overdone."
Also helping underpin the dollar, two of the Federal
Reserve's most hawkish policymakers who take up voting power
this year said the central bank should bring its bond-buying
programme to a swift close.
Investors quickly brought forward the likely timing of the
first Fed rate hike to August 2015 , having only just
pushed it out towards the back end of 2015 in the wake of
Friday's jobs numbers.
In contrast, the Bank of Japan is expected to continue
pumping in trillions of yen to help the economic recovery while
the European Central Bank is still grappling with falling
inflation and has pledged to keep rates low for longer.
But with the ECB's balance sheet still contracting as banks
repay cheap loans availed of earlier, the euro's losses against
the dollar are likely to be muted, analysts said. Repayment of
these loans cause excess liquidity in the euro zone banking
system to shrink and push up short term money market rates.
Excess liquidity dipped to 154 billion euros
($211 billion) from 155 billion on Tuesday.
"Tight euro zone liquidity in the short term is probably
slightly positive for the euro, although we are encouraged to
have seen the euro/dollar rally, post U.S. jobs data, to have
stalled at $1.3700," said Chris Turner, head of currency
strategy at ING.
The euro, though, was trading near a four-year high against
the Canadian dollar, with the latter under broad
pressure after recent weak data raised concerns about whether
the Bank of Canada may sound more dovish next week.
"We are looking for dollar/Canadian dollar to rise to
C$1.12," said Mankash Jain, head of FX and Investment
Management, at Solo Capital, a hedge fund. "Unless there is
strong economic data coming out of Canada we expect dollar
strength to weaken the Canadian dollar further."