* Dollar rises broadly after stronger U.S. consumer data
* Dollar, risk assets relationship breaks down
* Moody's sees no threat to UK, U.S. top rating for now
(Updates prices, adds quotes, details)
By Steven C. Johnson
NEW YORK, Dec 11 (Reuters) - The U.S. dollar jumped to a
two-month high against the euro on Friday after surprisingly
strong U.S. consumer data boosted expectations the Federal
Reserve would raise interest rates sooner rather than later.
U.S. retail sales posted the largest advance since August
last month, while consumer sentiment improved sharply in early
December. The reports stoked optimism about a recovery in the
world's largest economy and pushed the euro below $1.46 for the
first time since early October.
"The much stronger-than-expected retail sales number has
rekindled expectations of a rate hike sooner than anticipated,"
said Samarjit Shankar, managing director of global FX strategy
at BNY Mellon in Boston. "It does appear that the U.S. consumer
has been a little bit more resilient than anticipated."
The prospect of prolonged low U.S. interest rates has
undermined the dollar in recent months as investors borrow in
the low-yielding greenback and reinvest the money in stocks,
commodities and higher-yielding currencies in search of
returns. The euro hit a 16-month high above $1.51 in November.
The euro, which touched a 16-month high above $1.51 in
November, hit a trough of $1.4587 <EUR=> on Friday, according
to Reuters data, and was last down 0.9 percent at $1.4610.
That capped a difficult week for the euro zone currency,
which was buffeted by worries about the fiscal health of Greece
after Fitch cut its credit rating. The euro was down 1.6
percent this week, its worst weekly slide in over a month.
A member of the European Central Bank's Executive Board
said euro zone governments risked destroying confidence in
their economic management by running up unsustainable deficits
and public debt. See [].
The dollar rose 1.4 percent to 89.37 yen <JPY=>. Sterling
fell 0.2 percent to $1.6241 <GBP=> but gained on the euro
<GBPEUR=> and yen <GBPJPY=> after Moody's Investors Service
said Britain's top-notch sovereign rating was not under threat
even though UK fiscal health concerns remain. []
The top sovereign credit rating of the United States is also
not under threat of a downgrade right now, Moody's said.
DOLLAR, EQUITY BOTH UP
The stronger-than-expected U.S. data also led to a
breakdown in the inverse relationship between the dollar and
risky assets that has existed for much of the past year. Stocks
rose early before paring gains.
Good data has tended to pressure the greenback in recent
months as investors took on riskier, higher-yielding
investments and cut demand for the safe-haven U.S. currency.
"I think the risk appetite trade we've been talking about
for months is breaking down and I think the correlation between
positive U.S. data and dollar strength is going to take hold,"
said Melvin Harris, a strategist at Easy Forex in New York.
If subsequent data bolsters the case for the Fed to lift
interest rates from record lows sooner than expected, investors
wary of using the dollar to finance more lucrative trades
elsewhere and instead use the low-yielding yen, Harris said.
Analysts also said moves to exit profitable trades as the
year winds down were helping the dollar.
"Going into the end of the year ... there's quite a bit of
interest to cover short dollar positions across the board,"
said Ronald Simpson, director of currency research at Action
Economics in Tampa, Florida.
(Additional reporting by Wanfeng Zhou and Gertrude
Chavez-Dreyfuss)
