NEW YORK (Reuters) - The dollar climbed to a seven-month high against a basket of currencies on Wednesday and the blue chip Dow Jones stock index rose for a ninth straight session to notch yet another record after U.S. retail sales data stoked optimism on the economy,
The resilience of the U.S. economy contrasted with persistent problems in Europe. A weak Italian bond auction and disappointing data on euro zone factory output hurt the euro and pushed up borrowing costs for Italy and other debt-laden members of the 17-nation bloc.
Oil prices fell on a rise in U.S. inventories and a mildly bearish report from a major energy agency.
The U.S. government reported retail sales grew 1.1 percent in February, the biggest rise since September.
“Strong activity numbers will help maintain investor expectations that the U.S. economic recovery is best placed amongst G-3 to begin gaining traction this year,” said Samarjit Shankar, managing director of global FX strategy at BNY Mellon in Boston.
The dollar index .DXY, which tracks the greenback versus a basket of currencies, was up 0.43 percent at 82.936. It climbed earlier to 83.055, the highest level since August 3.
The euro was down 0.6 percent to $1.2953. The single currency hit a session low of $1.2922, the weakest since December 10.
The euro had fallen after the Italian debt auction, seen as a gauge of investor confidence in the euro zone’s third-biggest economy amid worries over whether its leaders could forge an effective parliament to tackle fiscal problems.
Italy sold 5.32 billion euros of new three- and 15-year government bonds, paying the highest yield since last December for the shorter-term debt.
The yield on 10-year Italian government debt on the open market rose 8 basis points to 4.66 percent.
The Italian auction results knocked European shares lower and remained a drag on Wall Street stocks even after the encouraging U.S. retail sales data.
On Wall Street, the rally continued on Wednesday, although moves have been muted in recent days as investors consolidate positions after a strong run-up in the first three months of the year. Still, weakness in stocks has been met with buying, which helped propel the market’s advance.
The rise in the Dow Jones industrial average marked the index’s longest consecutive winning streak since November 1996.
“Everything seems relatively tempered for a market that’s been making new highs almost every day, and I think that’s a relatively positive backdrop,” said Mark Lehmann, president at JMP Securities, an investment bank based in San Francisco.
The Dow Jones industrial average .DJI closed up 5.22 points, or 0.04 percent, at 14,455.28. The Standard & Poor's 500 Index .SPX finished up 2.04 points, or 0.13 percent, at 1,554.52. The Nasdaq Composite Index .IXIC ended up 2.80 points, or 0.09 percent, at 3,245.12. .N
The S&P 500 is within striking distance of its all-time closing high of 1,565.15 and about 1 percent away from an all-time intraday high of 1,576.09 - both set in 2007.
The U.S. retail sales data also sparked gains in European shares, as the data pointed to a continuing recovery in the world's biggest economy. The pan-European FTSEurofirst 300 share index .FTEU3 inched into positive territory at the close, up 0.01 percent at 1,194.1l. .EU
MSCI's world equity index .MIWD00000PUS finished 0.34 percent lower at 359.52, dragged down by a 0.6 percent fall in Tokyo's benchmark Nikkei index .N225.
The encouraging U.S. retail sales data briefly pushed U.S. government debt prices lower, but they bounced back after strong demand at a $21 billion 10-year auction. The benchmark 10-year Treasury note ended down 1/32 in price to yield 2.023 percent in choppy trading.
In commodities markets, benchmark oil prices fell after a report from the International Energy Agency said U.S. production would be enough to protect against most potential supply shocks.
Brent crude settled down $1.13 or 1.03 percent at $108.52 a barrel, while U.S. oil settled 2 cents, or 0.2 percent lower at $92.52, snapping a four-day day winning streak.
Gold prices fell as the U.S. retail sales data boosted optimism about the U.S. economy and after prices failed for a second time to surpass $1,600 an ounce, prompting investors to reduce bullion positions.
Spot gold was down 0.19 percent at $1,589.10 an ounce by 3:26 p.m. EDT, having earlier hit a two-week high at $1,599.10. U.S. COMEX gold futures for April delivery settled $3.30 lower at $1,588.40 an ounce.
“The failure of prices to break above $1,600 showed that the money managers, who had become buyers, were cautiously bullish,” said Carlos Perez-Santalla, commodities broker at PVM Futures.
Additional reporting by Wanfeng Zhou, Chuck Mikolajczak and Leah Schnurr in New York; Richard Hubbard in London; Editing by Dan Grebler, Chizu Nomiyama and Leslie Adler