Tuesday, September 15, 2009

CURRENCIES: Dollar Gains After Retail Sales, Price Data

Tue, Sep 15 2009, 15:54 GMT

CURRENCIES: Dollar Gains After Retail Sales, Price Data

By Deborah Levine

The dollar gained versus major counterparts Tuesday, after a pair of economic reports said retail sales and producer prices rose more than economists expected, encouraging speculation that the economy is reviving.

The dollar index (DXY), a measure of the U.S. unit against a basket of rival currencies, traded at 76.822, up from 76.727 in New York trade Monday afternoon.

The dollar rose to 91.18 Japanese yen, up from 91.02 yen late Monday.

Retail sales rose 2.7%, in large part stemming from the so-called "cash-for-clunkers" program. Still, excluding automobiles, sales increased 1.1%.

A separate report showed wholesale prices rose 1.7% last month. Excluding food and energy, prices increased 0.2%, also more than expected.

A third report from the New York Federal Reserve Bank said its Empire State Manufacturing index rose to 18.9 in September from 12.1 in August.

"This morning's economic reports were overwhelmingly positive for the U.S. dollar with fundamentals overshadowing risk appetite," said Kathy Lien, director of currency research at Global Forex Trading.

For months, the greenback has tended to move in the opposite direction as equities as investors' willingness to buy riskier assets fluctuates. That trend has shown signs of diminishing in the past month or so, and resuming its more traditional correlation to economic data.

"The feel good effect of today's numbers provided players with an excuse to trim back on short U.S. dollar positions with the greenback clearly in oversold territory," said Michael Woolfolk, senior currency strategist at Bank of New York Mellon.

The dollar stayed up after another report said business inventories declined 1% in July, roughly in line with expectations.

The euro traded at $1.4604, from $1.4614 versus the dollar on Monday.

The single currency was under more pressure in the overnight session after a gauge of German investor confidence posted a weaker-than-expected rise in September, but then trimmed losses.

The Mannheim-based Center for European Economic Research, or ZEW, said its economic expectations index rose to 57.7 in September, up from 56.1 in August. Economists had forecast a rise to 59.5.

British pound

The British pound was the big mover on currency markets, dropping versus the greenback and falling to a three-month low versus the European single currency after Bank of England Governor Mervyn King said the Monetary Policy Committee was considering a cut in the deposit rate paid on some reserves held by commercial banks at the BOE.

Such a move would penalize banks for holding reserves above a certain level at the central bank, spurring them to buy bonds and other assets. That would effectively expand the central bank's quantitative-easing program, analysts said.

The pound fell 0.9% versus the U.S. dollar to $1.6431. The euro moved to its highest level against sterling since June, and changed hands in recent action at 88.92 pence.

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(END) Dow Jones Newswires

September 15, 2009 11:54 ET (15:54 GMT)

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