Sun, Jul 16, 2006 - Page 10 News List

Greenback keeps soaring despite drop in retail sales

AFP AND CNA , NEW YORK AND TAIPEI

The US dollar continued its rise against other major currencies on Friday despite a surprise drop in US retail sales last month as violence continued to roil the Middle East.

Some traders said investors were buying US dollars as a safe haven bet as geopolitical fears mount amid the widening conflict in the Middle East. Israel on Friday continued its wide-ranging military offensive against Lebanon as Hezbollah guerrillas fired rockets into northern Israel.

The euro declined to US$1.2651 at 9pm GMT from US$1.2691 late in New York on Thursday.

The US currency meanwhile climbed to ¥116.15 from ¥115.37 late on Thursday, and also notched up gains against the British pound and Swiss franc.

"The US dollar rallied over the course of the week," said Mark Chandler, a currency analyst at the Scotiabank Group.

"The notion that geopolitical tensions were boosting safe-haven flows into the US dollar may explain some of the strength," Chandler said.

The dollar had gained earlier in the week on better US trade data, but Friday's economic news was disappointing as the Commerce Department said retail sales fell by an unexpected 0.1 percent last month.

It marked the first decline in retail sales since February, with sales largely dragged down by a decline in auto sales.

The auto sector registered a drop in sales of 1.4 percent in June following a decline of 2.1 percent in the prior month despite auto maker sales incentives.

"It seems to confirm the slowdown in consumption growth in the second quarter. Consumption may be at two percent or less in the second quarter and most economists would have hoped that it would bounce back in the third quarter," said Ian Morris, chief US economist for HSBC North America.

"That remains the expectation, but this report opens some question on that," Morris said.

In late New York trade, the US dollar stood at 1.2340 Swiss francs from SF1.2295 on Wednesday.

The British pound was being traded at US$1.8382 after US$1.8435 late on Thursday.

The US dollar gained ground against the New Taiwan dollar on the Taipei Foreign Exchange on Friday, increasing NT$0.111 to close at NT$32.687. A total of US$1.05 billion changed hands during the day's trading.

The US currency opened at NT$32.666 and fluctuated between NT$32.630 and NT$32.696.

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