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Sun, Oct 15, 2006 - Page 10 News List

Dollar gains ground as traders disregard drop in retail sales

AFP AND CNA , NEW YORK AND TAIPEI

The US dollar gained against the euro and the yen on Friday as traders largely appeared to downplay a US government report which showed a surprise drop in retail sales last month.

The euro was being quoted at US$1.2510 at 9pm GMT, compared with US$1.2554 late on Thursday in New York. The dollar was meanwhile trading at ?119.63, up from ?119.33 on Thursday.

The moves came after a government report showed US retail sales fell 0.4 percent last month, despite most economists predicting a 0.2 percent rise in the monthly sales report.

But traders said the data were heavily impacted by gasoline station sales posting a 9.3 percent drop, their largest drop since the data series began in its present form, in 1992.

Sales excluding motor vehicles and gasoline were up 0.8 percent in their best showing since January.

Thus, it appeared consumers took their savings from lower motor fuel prices and spent on other items: Furniture sales were up 0.2 percent, clothing up 3 percent, electronics up 0.2 percent and restaurant spending up 1.0 percent.

"Participants noted the underlying strength in the data after adjusting for gasoline sales. The dollar strengthened on the news," Michael Carey at CALYON said.

"The ability of the US dollar to hold at these levels in the face of such bearish data highlights the market's current disposition to discount US dollar-negative data," analysts at ABN AMRO said in a note to investors.

The University of Michigan consumer sentiment index jumped to 92.3 in a preliminary reading for this month, beating Wall Street forecasts of 86.5.

In late New York trading, the greenback stood at 1.2729 Swiss francs, up from SF1.2686 on Thursday.

The pound was being traded at US$1.8554 from US$1.8586 late on Thursday.

The US currency dropped against the New Taiwan dollar on the Taipei Foreign Exchange on Friday, losing NT$0.109 to close at NT$33.130.

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