(Updates prices, adds comments, adds detail)
By Steven C. Johnson
NEW YORK, Feb 13 (Reuters) - The dollar rose to a one-month
high against the yen on Wednesday after government data showed
an unexpected rise in U.S. retail sales last month, dampening
views that the U.S. economy is contracting.
The small gain in January retail sales bucked expectations
for a drop in monthly U.S. cash register receipts, but analysts
said the outlook for both the economy and the dollar remained
uncertain.
"The data is clearly a surprise to the upside. It is
somewhat reassuring to a market that had been concerned with a
slowdown in consumer spending, which of course raises the risk
of recession," said Omer Esiner, market analyst at Ruesch
International in Washington.
"On balance, the report is dollar-positive, although I
don't think it changes the outlook for further (Federal Reserve
interest) rate cuts," he said. "But in the near term, it does
ease some recession concerns."
The dollar jumped against the yen after the data, rising to
a one-month high of 108.37 yen <JPY=> before easing to 108.15
yen, up 0.8 percent from late Tuesday.
Dealers, though, reported substantial selling interest
above 108 yen, suggesting the greenback may have difficulty
holding above that level for long.
Even at current levels, the dollar remains in the middle of
a downward trend that began in June, 2007, when it rose above
123 yen. To break out of that, it would have to rise above 112
yen. With the Federal Reserve still seen reducing benchmark
interest rates, analysts say that's unlikely any time soon.
Some analysts also said the sunny sales report does not
alter the big picture view of slowing U.S. consumer spending
undermining the dollar.
"We would doubt there's much more upside from current
levels and certainly think these are good opportunities to be
selling some dollars," said Robert Sinche, head of liquid
products strategy at Bank of America in New York.
"Our own preference is to sell against the euro and pound,
but in general we think these dollar gains are unlikely to
persist much longer."
The euro was 0.1 percent weaker at $1.4566 <EUR=> after
earlier hitting a session low at $1.4533. It rose 0.7 percent
to 157.61 yen <EURJPY=>.
Sterling was little changed at $1.9610 <GBP=>, having
surrendered earlier gains seen after the Bank of England said
in a quarterly inflation report that it would overshoot its 2
percent inflation target if it cuts rates too quickly.
CMC Markets analyst Ashraf Laidi said the dollar could run
out of steam later in the session as traders scale back
positions ahead of Thursday's testimony by Fed Chairman Ben
Bernanke, who may signal more rate cuts to come.
Since September, the Fed has slashed benchmark interest by
2.25 percentage points to 3 percent. Some investors have said
this aggressive easing may be helping to keep the economy out
of a recession.
Based on interest rate futures, markets expect the Fed to
reduce its benchmark interest rate to as low as 2 percent this
year. Sinche said that is probably "a little bit further than
the Fed wants to go."
But he said Bernanke is unlikely to delve into such details
on Thursday.
"Now is not the time to talk about that," Sinche said.
"Now's the time to talk about dealing with economic weakness,
and I don't think he will want to send a cautionary message
until they're more comfortable that a bottoming process in the
economy and the financial sector has come into view."
(Reporting by Steven C. Johnson; Additional reporting by
Gertrude Chavez-Dreyfuss; Editing by Richard Satran )
