* Euro hits two-month high vs dollar
* Weak U.S. data weighs on greenback, earnings don't help
* Fed minutes show policy makers concerned with economy
* Sterling soars to 10-week high on employment data
(Adds comments, details. Changes byline)
By Vivianne Rodrigues
NEW YORK, July 14 (Reuters) - The euro hit a two-month high
on Wednesday and the dollar fell against the yen after the
Federal Reserve's minutes of its last meeting showed policy
makers were concerned the U.S. recovery may be slowing.
The Federal Open Market Committee minutes weighed on the
greenback, which fell earlier after data showed U.S. retail
sales declined for a second straight month.
Fed officials revised down slightly their outlook for the
economy in the second half, while the minutes said the
committee would need to consider whether "further policy
stimulus might become appropriate if the outlook were to worsen
appreciably." []
"The main point is that there is divided opinion within the
Fed about how aggressively they should act as the economy slows
further," Samarjit Shankar, managing director of global FX
strategy at BNY Mellon in Boston.
"(The Fed) will not be averse to keeping interest rates low
for an extended period," which would hurt the dollar, he
added.
Strong U.S. corporate earnings being released this week
encouraged investors to seek higher-yielding currencies,
including the euro, but have not helped the greenback as some
investors see them as a lagging indicator of economic health.
The dollar struggled after the June retail sales report,
which followed data on Tuesday showing a wider U.S. trade
deficit in May. []
The greenback slid 0.6 percent to 88.14 yen <JYP=>.
Meanwhile, the European currency hit $1.2778 <EUR=>, its
highest since early May.
The euro pared some of its gains after the FOMC minutes but
was still above a session low of $1.2683 earlier on on
lingering concern about some euro zone countries' debt woes.
However, recent smooth bond auctions in Portugal, Germany and
Greece have eased such worries. []
Sterling soared to a 10-week high as better-than-expected
UK employment data added to speculation the Bank of England may
have to start thinking about raising interest rates.
Sterling rose 0.7 percent to $1.5275 <GBP=D4> after earlier
hitting its highest level since May after better-than-expected
employment data. []
EARNINGS, TECHNICAL BOOST EURO
While U.S. data has been on the soft side, U.S. corporate
earnings have been surprisingly strong so far, and that's also
helped risk appetite lately.
The next target for euro/dollar was the $1.30 area, said
Roberto Mialich, currency strategist at Unicredit in Milan.
Others said the next target was at $1.2780, the 50 percent
retracement of the euro's fall from mid-April to the June low.
Richard Ross, technical strategist at Auerbach Grayson in
New York, said breaks through $1.27 and then $1.2760 brought in
new buyers and said momentum may carry it to $1.28.
"Markets like round numbers and 1.28 is a good
psychological one, even though it is not a particularly key
technical indicator," he said. "But certainly, a lot of people
would like to see that one go."
With the U.S. 10-year Treasury yielding barely more than 3
percent, traders also cited a growing demand for
higher-yielding assets and growth-related currencies.
The Australian <AUD=D4> and New Zealand dollars <NZD=D4>
rose against the greenback on Wednesday while stocks recovered
earlier losses.
"If growth is slowing, yields are likely to fall, so people
want to lock in higher yields now," said Marc Chandler, senior
currency strategist at Brown Brothers Harriman in New York.
"Bottom line...(the Fed) is not hawkish enough to reverse
the negative sentiment toward the dollar and it is not dovish
enough to heighten expectations for a resumption of credit
easing."
(Additional reporting by Steven C. Johnson, Wanfeng Zhou
and Nick Olivari in New York; Editing by Chizu Nomiyama)
