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Dollar falls in july with low retail sales Original Source Link: (May no longer be active)
http://quote.bloomberg.com/apps/news?pid=10000006&sid=acbn5whgBkHM&refer=homehttp://quote.bloomberg.com/apps/news?pid=10000006&sid=acbn5whgBkHM&refer=home
Dollar Falls as Retail Sales in July Grew Less Than Forecast
Aug. 11 (Bloomberg) -- The dollar dropped to a 10-week low against the euro and fell the weakest since June versus the yen after a government report showed U.S. retail sales in July grew less than economists predicted.
The U.S. currency lost ground the past five weeks even as reports showed the nation's job growth quickening and the Federal Reserve raised its benchmark interest rate for a 10th straight time, expanding the rate advantage over Europe and Japan.
``Expectations for U.S. data have been very high,'' said Eric Darwell, a currency strategist in New York at Citigroup Inc., the world's biggest financial services company. ``Though we have gotten strong numbers, we haven't seen a strengthening dollar.''
The dollar fell to $1.2437 per euro at 11:37 a.m. in New York, the lowest since May 31, from $1.2382 late yesterday, according to electronic currency-dealing system EBS. Against the yen, it dropped to 109.90, and reached the lowest since June 29, from 110.66.
Citigroup forecasts a dollar decline to $1.28 per euro by year-end, and to 100 yen.
U.S. retail sales increased 1.8 percent last month following a 1.7 percent gain in June, a government report showed. The increase was less than the 2.1 percent median estimate in a Bloomberg survey.
Trade Burden
Traders also said the dollar is weighed down before tomorrow's trade report. The U.S. is forecast to say its trade deficit expanded to $57.2 billion in June, from $55.3 billion the prior month. It would be the widest since a record $60.1 billion shortfall in February.
A wider trade deficit ``could in my opinion start to kick the dollar in the teeth again,'' said Michael Malpede, senior currency strategist in Chicago at futures broker Refco Group Ltd. He forecasts a dollar drop below 109 yen in the next few weeks.
The dollar fell the past three years as the trade gap swelled, fueling concern its growth would outpace foreigners' appetite for U.S. assets. The dollar reached a record low of $1.3666 per euro in December.
A separate report showed U.S. jobless claims fell to 308,000 in the week through Aug. 6, from a revised 314,000 the week before.
Chinese Basket
Investors are also selling dollars after China yesterday said the basket of currencies it uses to value the yuan includes the euro, yen, and Korean won. China on July 21 abandoned a decade-old peg of 8.3 yuan per dollar.
``It will diminish the need for the Chinese to buy so many dollars,'' said Malpede at Refco. ``That's a change in the landscape. There could be more diversification out of dollars.''
Malpede said Refco is seeing ``less demand for the dollar across the board.''
The yen began rising earlier today after a government report showed foreign investors last week bought the most Japanese shares in five months.
Japan's Nikkei 225 Stock Average reached a four-year high amid optimism the economy is strengthening. The yen also rose as a Nikkei English News poll showed higher ratings for Prime Minister Junichiro Koizumi, signaling he may win elections next month.
``We're definitely looking for the yen to recover,'' said Sean Callow, a currency strategist in New York at Westpac Banking Corp. ``The market's tending to look on the bright side and assuming Koizumi will hold power.''
The bank predicts 105 yen per dollar at year-end.
Foreign Buying
Foreign investors bought a net 495 billion yen ($4.49 billion) of Japanese stocks in the week ended Aug. 5, the Ministry of Finance said today. The Nikkei closed at 12,263.32, the highest since August 2001.
The Japanese government and central bank both said this week that growth is gathering strength. A government report tomorrow may show the economy expanded 0.5 percent in the second quarter, extending a recovery from its fourth recession since 1991, according to the median forecast in a Bloomberg survey.
Koizumi this week called elections for Sept. 11 after parliament rejected his proposals to sell the state-run postal service. The prime minister staked his career on plans to end state control of Japan Post's 350 trillion yen of assets, the world's biggest saving bank.
Orders to Sell
Gains in the euro above $1.2430 may be difficult to sustain because traders have pre-set orders to sell the currency at that level, according to Uwe Parpart, a currency strategist at Bank of America Corp. in Hong Kong. The euro hasn't closed above that level since May 31.
European economic growth will accelerate to the fastest pace in almost two years at the end of 2005 after a second- quarter slowdown as a decline in the euro helps exports, the European Commission said today.
The economy of the dozen nations sharing the euro will probably expand about 0.6 percent in fourth quarter and about 0.4 percent in the third, the Brussels-based commission said. Growth slowed to 0.3 percent in the second quarter, Eurostat, the European Union's statistics office, said separately.
Last Updated: August 11, 2005 11:48 EDT
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