* Dollar firm after G7 backs Japan's easing efforts
* Dollar hits 4-1/2-year highs versus yen
* Oil, gold prices fall on dollar's strength
* U.S., European stocks pause at recent highs
By Richard Leong
NEW YORK, May 13 The dollar rose against the yen
and held steady against most major currencies on Monday after
the Group of Seven backed Japan's efforts to spur growth through
aggressive asset purchases, and oil and gold prices fell on the
A surprise rise in U.S. retail sales in April supported
views that the U.S. economy, the world's biggest, remains
resilient. The optimistic tone to the data supported the
dollar's recent strength, and JPMorgan raised its outlook for
On Wall Street, the broad S&P 500 index reversed earlier
losses on profit-taking following last week's stellar run to
record highs, while weakness in the top European banking sector
knocked the region's share prices lower.
"The value of the dollar has weighed on the prices of all
commodities, specially the more sensitive ones such as oil and
gold," said Harry Tchilinguirian, head of commodity market
strategy at BNP Paribas.
A stronger dollar makes dollar-denominated commodities such
as oil more expensive for holders of other currencies.
The renewed optimism on the economy after the retails sales
data drove down prices of Treasuries, a traditional safe-haven.
In over a week, the yield on the 10-year not has risen nearly
0.30 percentage point from its lowest level of the year
following the better-than-expected April jobs report and the
dollar's surge against the yen.
The dollar, which has risen 5 percent against a
basket of major currencies since February, and double that
versus the yen, looked unlikely to buckle after G7 officials
meeting over the weekend in Britain showed little concern about
the Japanese currency's slump.
The greenback hit a 4-1/2-year high of 102.14 yen in Asian
trading, but it reversed course following the U.S. retail sales
numbers, down 0.07 percent to 101.77 yen. The euro edged
up 0.1 percent against the dollar at $1.2973.
"Yen selling will have been encouraged by the outcome from
the G7 meeting, where officials reiterated that they will
tolerate yen weakness as long as it results from the use of
domestic instruments to stimulate the Japanese economy," said
Lee Hardman, a currency analyst with Bank of Toyko-Mitsubishi.
Brent oil prices slipped back below $103 a barrel,
with ample supply weighing on sentiment as well as the stronger
Weaker-than-expected industrial output data from China also
helped push oil prices lower. London copper, however,
climbed 0.09 percent to $7,382 a tonne, as the data raised hopes
that monetary authorities in China, the world's biggest metals
consumer, may embark on further easing to underpin demand.
China's annual industrial output grew 9.3 percent in April,
up from a seven-month low of 8.9 percent in March but still
missing market expectations for a 9.5 percent expansion.
Spot gold, often bought as an alternative safe-haven
to the dollar, fell 0.9 percent to 1,434.71 an ounce.
STOCKS' POSITIVE TREND
With the Standard & Poor's 500 index having closed at
a record high on Friday and European shares starting the week at
five-year highs, investors had reason to cash in some gains as
worries about another spring "swoon" persisted.
In midday trading, the Dow Jones industrial average
was down 26.02 points, or 0.17 percent, at 15,092.47. The
Standard & Poor's 500 Index was up 0.56 points, or 0.03
percent, at 1,634.26. The Nasdaq Composite Index was up
5.19 points, or 0.15 percent, at 3,441.77.
The pan-European FTSEurofirst 300 index closed down
0.27 percent at 1,230.12, and the MSCI global index
was down 0.02 percent at 374.14.
In the bond market, benchmark 10-year Treasury notes
fell 7/32 in price to yield 1.926 percent - just
below a six-week high in yield set earlier.
German Bund futures were up 0.1 percent at 144.84.
Italy's three-year debt costs fell to their
lowest level since January at an auction on Monday as the
backstop from the European Central Bank fed demand for bonds of
the euro zone's heavily indebted members.
The head of Italy's central bank, Ignazio Visco, who is also
a policymaker of the European Central Bank, in an interview with
CNBC television suggested the ECB could cut its deposit rate
below zero. His comments lifted Bund futures from their lowest
levels in more than a month after last week's decline on upbeat
euro zone and U.S. data.
If the ECB were to push its deposit rate into negative
territory, banks would effectively be charged for parking any
spare cash they do not lend, something that analysts believe
would send investors into other more profitable ultra-safe
assets such as Bunds.