NEW YORK (Dow Jones)--The dollar rallied versus its rivals early Tuesday in New York after the U.S. April retail sales report offered signs of hope for the economy.
U.S. retail sales fell by 0.2% during April, but the decline was narrow and due to a plunge in the automobile industry. Also, demand climbed in many sectors, a sign the economy might not be as weak as feared. To boot, ex-auto sales for March were revised way up to 0.4%, instead of the previously estimated 0.1% increase, the Commerce Department said Tuesday.
"This is providing the dollar with some renewed support," in particular against the yen, said Ian Stannard, senior foreign exchange strategist at BNP Paribas in London.
He said the dollar could rebound back toward recent highs in the Y105.80 area.
Recently, the dollar rose to intraday highs against both the euro and yen. The single currency fell to $1.5430 and the dollar grew to Y104.61.
While this represented a significant gain for the dollar, Stannard is "slightly cautious" of extrapolating too much meaning for the U.S. economy and dollar from this report.
"There is no sign yet of the U.S. housing market stabilizing going forward. This is not a sustained turnaround for the U.S. economy or the dollar," he said.
Early Tuesday in New York, the euro was at $1.5436 from $1.5536 late Monday, while the dollar was at Y104.57 from Y103.93. The euro was at Y161.45 from Y161.48, according to EBS. The U.K. pound was at $1.9464 from $1.9570 late Monday, and the dollar was at CHF1.0540 from CHF1.0445.
The dollar made gains overnight as well, benefiting from bad economic news out of the U.K. and euro zone.
U.K. retail sales experienced their largest year-on-year fall for three years in April, and the second consecutive monthly decline, the British Retail Consortium said Tuesday. Also, the U.K. consumer price index rose at its sharpest pace in almost six years in April. The signs of slowing growth and rising inflation create a dilemma for the Bank of England, which was widely expected to cut interest rates at its next monetary policy meeting. The CPI numbers will make it more difficult to justify an easing of policy at this stage.
Sterling notably fell on the news to an intraday low of $1.9456.
Following this news, and ahead of several upcoming Federal Reserve speakers as well as euro-zone and U.S. CPI this week, markets are "positioning for more signals that the Fed's monetary easing cycle is essentially finished and that inflationary pressures are becoming not only a European, but also a U.S. focus," said Camilla Sutton, currency strategist at Scotia Capital in Toronto.
In the euro zone, meanwhile, fears of further fallout from the credit crunch appeared justified when Societe Generale announced disappointing first quarter earnings, and then Calyon Credit Agricole said it would seek a capital increase. That weighed down the euro.
-By Riva Froymovich, Dow Jones Newswires; 201 938-5063; riva.froymovich@dowjones.com
url: http://www.djnewswires.com/eu
Dollar Jumps Vs Rivals After US Apr Retail Sales
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