FOREX-Dollar falls broadly ahead of retail sales
LONDON, Aug 11 (Reuters) - The dollar fell to its lowest levels against the euro and Swiss franc in about two months on Thursday, extending a recent decline, while the yen jumped on strong gains in Tokyo stocks and fading political worries. U.S. retail sales data later in the session is expected to show strong growth but the upbeat forecasts failed to boost the dollar as investors appeared keen to take profits on this year's 10-percent rally.
"We are just seeing continued dollar consolidation," said Jeremy Stretch, currency strategist at Rabobank in London.
"The market has become accustomed to strong U.S. data across the board and much of the good news is priced in so dollar longs are getting frustrated."
At 1200 GMT the dollar traded 0.2 percent down on the day at $1.2408 per euro, after hitting $1.2431, its lowest level since the end of May. It also fell to 1.2503 Swiss francs, a low from June 8.
Euro zone data showed the bloc's economy growing at a slightly faster than expected pace of 1.2 percent on the year in the second quarter.
Against the yen, the dollar fell to 110.12 yen, a three-week low, before regaining some ground to 110.40.
Meanwhile, the Norwegian crown eased slightly versus the dollar and euro after the country's central bank kept interest rates at 2 percent but appeared less hawkish than some analysts had expected.
DOLLAR DATA
Analysts said the dollar was unlikely to benefit sustainably from strong retail sales data because investors have grown accustomed to upbeat economic figures from the U.S. There were also concerns about U.S. trade figures due on Friday.
"It is difficult to see this release providing much reprieve for the dollar. In fact, as the market's attention turns towards structural issues, it is the June trade balance data, due for release tomorrow, which will grab the focus," UBS analysts said in a note.
The Japanese currency was bolstered by Tokyo stocks which hit four-year highs on optimism about Japan's economy amid buying by foreign investors.
It reversed losses made following Prime Minister Junichiro Koizumi's called for an election after losing a parliamentary vote on privatising the postal system.
Public opinion polls showed on Wednesday Koizumi's support rating had risen since he called the election for Sept. 11 to seek a new mandate for reforms.
Even before this week's rally, foreign investors bought a net 495.0 billion yen ($4.47 billion) of Japanese stocks in the week ended Aug. 6, taking their net purchases this calendar year to 5.27 trillion yen.
The yield on two-year Japanese government bonds hit an 11-month high while yen money market futures fell as speculation swelled that the Bank of Japan would end its zero interest rate policy early next year.
After upbeat machinery orders data this week, investors are looking ahead to Japan's gross domestic product figures for the April-June quarter on Friday for evidence of robust growth.
Talk that Japanese investors were preparing to repatriate coupon payments on U.S. Treasuries also helped the yen, traders said.
Analysts have estimated that $5 billion of the $24.7 billion in coupons to be issued on Aug. 15 will go to Japanese investors. Barclays Capital said coupon-related sales of dollars for yen could total $900 million a day between Friday and next Tuesday.
"The yen is trading a bit better on the back of fundamentals," said Stretch. "There are signs of foreign investors coming back to Japan again and the market has been very short yen for a considerable period."
A Reuters poll showed economists expect Japan's economy to have grown 0.5 percent quarter-on-quarter in April-June for an annualised pace of 2.0 percent. The economy expanded at an annualised 4.9 percent in January-March, its fastest in a year. "You see a lot of selling pressure in dollar/yen... People are not only taking off positions in dollar/yen but also in dollar/Swiss and euro/dollar, so you have a spill-over effect," said Hans-Guenter Redeker, chief foreign exchange strategist at BNP Paribas in London.
U.S. retail sales are expected to rise 2.2 percent in July from the previous month and 0.6 percent with auto sales excluded.
Source:Reuters
