Sun, May 13, 2007 - Page 10 News List

Greenback slips against euro as retail sales drop


The US dollar fell against the euro on Friday following reports on US retail sales and wholesale price trends that appeared to increase chances of an eventual US interest rate cut.

The euro in late-day trading was at US$1.3523 around 9pm GMT after US$1.3483 late on Thursday in New York.

The greenback gained ground against the New Taiwan dollar on Friday, increasing NT$0.012 to close at NT$33.300.

A total of US$593 million changed hands during the day's trading. The US currency opened at NT$33.285 and fluctuated between NT$33.250 and NT$33.320.

The US dollar was meanwhile trading at ?120.19 against ?119.90 on Thursday.

The US Commerce Department reported earlier that retail sales last month fell an unexpected 0.2 percent. The news caught Wall Street off guard, as most analysts had been expecting retail sales to rise 0.4 percent.

In a separate report the US Labor Department said that while US wholesale prices increased 0.7 percent overall last month, the key measure of "core" inflation was flat.

Inflation worries

The core index, excluding food and energy and seen by some as a better gauge of future trends, was flat for a second consecutive month, which should ease some concerns about inflation.

"It's a good inflation showing since it is the core that matters," Robert Brusca at FAO Economics said.

However, the drop in retail sales and wholesale inflation was not as bad as the headline numbers had suggested, and this could buy the currency some time to round up a few more positive indicators to stoke momentum.

The US Federal Reserve has given few indications recently that it is going to cut borrowing costs soon. A statement accompanying its decision this week to keep the key Fed funds rate unchanged at 5.25 percent still warned about inflationary risks ahead.

The dollar also got a lift from the political front, after a bipartisan deal between US President George W. Bush's administration and the Democratic-controlled Congress to set environmental and labor standards in free-trade agreements.

The deal, announced late on Thursday in Washington, offered hope that partisan disputes over trade bills may be easing.

`utter protectionism'

"With the US government seemingly on a path to utter protectionism, this is a break in the clouds for dollar traders," John Kicklighter, an analyst at Forex Capital Markets, said.

Earlier it had been supported by comments from Bush and US Treasury Secretary Henry Paulson.

Paulson repeated the standard US line that a strong dollar was in America's best interests, while Bush said he would attempt to lower trade barriers to attract foreign investment.

Elsewhere, the yen remained firm on fears that carry trades would be unwound in the wake of sharp falls on US and Asian stock exchanges overnight.

That prompted concern that carry trades -- where investors borrow in low yielding currencies such as the yen to invest in high yielding assets elsewhere -- will unwind as risk appetite wanes.

Analysts said the yen also gained support from expectations of strong first-quarter Japanese GDP figures next week.

In late New York trading, the US dollar slipped to 1.2189 Swiss francs from SF1.2196 late on Thursday.

The pound rose to US$1.9812 after US$1.9791 on Thursday.

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