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Dollar declines against euro Original Source Link: (May no longer be active)
http://quote.bloomberg.com/apps/news?pid=10000087&sid=aAYW57h4IZQ0&refer=top_world_newshttp://quote.bloomberg.com/apps/news?pid=10000087&sid=aAYW57h4IZQ0&refer=top_world_news
Dollar Declines Against Euro Before U.S. Retail Sales Report
July 14 (Bloomberg) -- The dollar fell against the euro by the most in a week before a government report expected to show the biggest drop in U.S. retail sales since February 2003.
Today's decline comes after the U.S. currency yesterday had its biggest advance against the euro in two weeks, following a government report that showed the U.S. trade deficit unexpectedly narrowed in May. Retail sales may fall 0.8 percent, according to the median of 68 forecasts in a Bloomberg survey.
``Retail sales could provide the spark for the dollar to come under further pressure,'' said Ryan Faulkner, a currency strategist in London at Lehman Brothers Holdings Inc. The dollar may this week slump to $1.25, the lowest since March 1, said Faulkner, who previously worked at the Federal Reserve.
Against the euro, the dollar slid to $1.2373 as of 7:30 a.m. in New York from $1.2327 late yesterday, according to the electronic foreign-exchange dealing system EBS. Lehman last week cut its forecast for the dollar to $1.27 in three months from $1.24 previously. The yen dropped for a third day to 108.90 per dollar from 108.66.
``The retail sales numbers are likely to be pretty poor, and should hurt the dollar,'' said Robert Rennie, currency strategist in Sydney at Westpac Banking Corp. The Commerce Department's retail sales report is scheduled for release at 8:30 a.m. in Washington.
The estimated 0.8 percent drop in June would compare with a 1.2 percent gain in May. Less autos, sales may have risen 0.2 percent, according to Bloomberg's survey. They rose 0.7 percent in the prior month.
Import prices, also slated for release at 8:30 a.m., probably rose 0.1 percent last month compared with 1.6 percent in May, a separate survey found.
The yen fell against the dollar and euro after Japan's Nikkei 225 stock average fell the most in two months, curbing appetite for the country's currency. Against the euro, the yen fell to 134.79 from 133.98 yesterday.
ECB's Issing
``When the Nikkei falls, it tends to be negative for the yen,'' said Marvin Barth, a currency strategist at Citigroup Inc. in London and a former Federal Reserve economist. ``The relationship between equities and the yen is a driving force.'' Citigroup still forecasts the yen to gain to 106 per dollar in three months.
Japan's currency failed to hold gains made earlier in Asian trading after UFJ Holdings Inc. said it's seeking a merger with Mitsubishi Tokyo Financial Group Ltd., a combination that would create the world's largest bank and may help reduce bad loans in Japan's finance industry.
The euro also climbed against the yen and the dollar after European Central Bank Chief Economist Otmar Issing signaled the central bank is concerned about rising prices.
Issing said in an interview with Japan's Nihon Keizai newspaper that the ECB may need to check signs of inflation. The central bank hasn't raised interest rates in four years. Its benchmark rate of 2 percent compares with the Federal Reserve's target of 1.25 percent.
Japan Bank Merger
``The ECB will hike rates sooner or later, possibly in autumn this year,'' said Hans Guenter Redeker, head of currency strategy in London at BNP Paribas SA. ``That should support the euro'' in coming weeks.
Demand for the yen, down 0.6 percent this month against the dollar, has waned as the Nikkei retreated 4.2 percent. Foreigners were net buyers of Japanese stocks for five of the six weeks through July 2, according to government figures.
``People had bought yen on optimism the UFJ-Tokyo-Mitsubishi news, which is very positive for Japan, would boost the Nikkei,'' said Tsutomu Soma, a trader in Tokyo at Okasan Securities Co., who has been trading currencies and derivatives for 15 years. ``The Nikkei is lower, disappointing some people, who in turn, have given up buying yen.''
The Nikkei fell 2.2 percent, led by semi-conductor related shares, after Intel Corp. said profit margins may be narrower than its own forecast. Electronics goods account for a quarter of Japan's total exports. The Nikkei rose as much as 0.5 percent earlier after UFJ, which has the most bad loans of Japan's four largest banks, said it requested a union with Mitsubishi.
Japanese Confidence
The yen remained lower after a government report showed Japanese consumer confidence unexpectedly fell in June and a separate survey showed department store sales in Tokyo shrank last month.
``We've seen a string of strong data recently from Japan but today, there have been a few reports that aren't positive for the yen,'' said Citigroup's Barth, who still expects the yen to gain in coming months. ``Yen strength is a persistent phenomenon.''
Japanese consumer confidence fell to 45.1 from 48.3 in May, the Cabinet Office said. The median forecast of six economists surveyed by Bloomberg was 49. A reading below 50 means pessimists outnumber optimists.
Department store sales fell 6.1 percent in June, marking the fourth month of declines, the Japan Department Stores Association said.
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