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FOREX-Dollar climbs as U.S. slowdown fears abate on retail sales
May 13, 2013 / 5:46 PM / in 5 years

FOREX-Dollar climbs as U.S. slowdown fears abate on retail sales

* Yen hits lows versus dollar, euro after G7 meeting
    * U.S. April retail sales edge up unexpectedly
    * Euro dips on ECB's Visco's comments

    NEW YORK, May 13 (Reuters) - The dollar rallied session
against the yen and euro for a third straight on Monday as U.S.
retail sales data assuaged fears about an economic slowdown in
the world's largest economy.
    The dollar, which pierced the 100-yen mark last week,
continued to add to gains, hitting its highest level against the
yen since October 2008 after Group of Seven finance officials
over the weekend held back from directly criticizing Japan's
monetary policy. 
    The U.S. currency's outperformance can largely be attributed
to diverging central bank policies, with aggressive monetary
easing in Japan and concerns about the risk of negative deposit
rates in the euro zone contrasting with expectations the U.S.
Federal Reserve will scale back its asset-buying program later
this year.
    The greenback received an added boost from data showing U.S.
retail sales unexpectedly rose in April as households bought
automobiles, building materials and a range of other goods,
pointing to underlying strength in the economy. 
    The increase in core sales came on the heels of relatively
strong job growth over the last three months. The state of the
labor market is a key component of Fed policy.
    "Commentary from the G7 meeting was roundly supportive of
Japan's policies, with the Japanese envoy declaring victory upon
leaving London, gleefully noting that no G7 member was opposed
to the country's aggressive and fiscal easing policies," said
Christopher Vecchio, currency analyst at DailyFX in New York.
"If the yen continues to weaken at its current pace, the G7 is
likely to change its tune - but for now, there's little
exogenous pushback."
    The dollar last traded at 101.89 yen, up 0.3 percent
on the day. It reached a session peak of 102.14 on Reuters
trading platform, its highest since October 2008, as investors
saw the outcome of the G7 meeting as a signal to sell the
Japanese currency. 
    A bevy of Federal Reserve speakers will provide
opportunities for updates on the Fed's exit and the paring back
of its asset purchase plan.
    An article in the Wall Street Journal over the weekend
suggested the Fed was working on a plan to taper its bond
buying, currently at $85 billion a month, but gave no indication
on the timing.
     "There are a lot of Fed speakers this week, but it is clear
from their last policy meeting that they are debating both
sides, either decreasing or increasing stimulus," said Win Thin,
global head of emerging market currency strategy at Brown
Brothers Harriman in New York.         
    Fed Chairman Ben Bernanke will deliver testimony on May 22
on the outlook for the U.S. economy before the Joint Economic
Committee of Congress. 
    Second-quarter U.S. growth could also get a boost from
inventories, after businesses kept lean stocks in the first
three months of the year. Another report on Monday showed
business inventories were flat in March for a second straight
    Traders said investors took profits on dollar gains above
102 yen, and the currency may struggle in the short term before
a reported options barrier at 102.50 yen. But most expect more
yen falls, with many seeing a drop toward 105 per dollar.

    The euro was last down 0.1 percent at $1.2980,
pressured after European Central Bank policymaker Ignazio Visco
said the central bank may opt for negative deposit rates.
    If the ECB did push its deposit rate into negative
territory, banks would effectively be charged for parking spare
cash they do not lend. 
    In a Reuters poll conducted after Visco's comments, 22 of 25
euro money market traders said they did not expect the ECB to
cut the rate below zero - in line with findings of a wider poll
of economists taken last week.  
    Meanwhile, Italy's three-year debt costs fell to
their lowest 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. 
    Against the yen, the euro rose 0.2 percent to 132.26
 yen, just below an early three-year high of 132.39,
according to Reuters data.

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