Dollar rallies as retail sales top forecasts to bolster outlook

The dollar rose against most of its major peers after a report showed U.S. retail sales in February exceeded forecasts, bolstering optimism in the world’s largest economy.

The euro weakened as Italian borrowing costs rose at a debt sale. The Reserve Bank of New Zealand is expected to keep the country’s key interest rate at an all-time low at a policy meeting today. Japan’s currency rose versus the majority of its most-traded peers after the country’s largest opposition party said yesterday it would vote against deputy governor nominee Kikuo Iwata, who advocates more easing.

“It’s a good reaction to the positive data figure, which helps the dollar,” Brian Kim, a foreign-exchange strategist at Royal Bank of Scotland Group Plc’s RBS Securities unit in Stamford, Connecticut, said in a telephone interview. “We have seen an overall better data, stronger dollar relationship, and that holds right here.”

The dollar appreciated 0.5% to $1.2965 against the euro at 9:07 a.m. in New York. It fell 0.2% to 95.94 yen after earlier falling as much as 0.7%. The 17-nation currency declined 0.6% to 124.43 yen.

Economic Data

The 1.1% retail sales advance exceeded all projections in a Bloomberg survey and followed a revised 0.2% gain in January, Commerce Department figures showed today in Washington. The median forecast was for a 0.5% advance. Sales excluding the volatile categories of autos and gasoline rose 0.4%.

“We only see definitive signs of recovery in the U.S. and nowhere else,” Stephen Jen, managing partner at SLJ Macro Partners LLP, said at Bloomberg Link’s FX Debates in London. “In the world where growth is decoupling and the U.S. is leading the world into a recovery, the dollar will perform quite well as risk capital is attracted into the U.S. It’s very hard to short the dollar now.”

The Your Party said today it will oppose Haruhiko Kuroda’s nomination for BOJ governor and Hiroshi Nakaso for deputy, while supporting Iwata. The Japan Restoration Party said it will endorse Kuroda and Iwata and oppose Nakaso. The main opposition Democratic Party of Japan said yesterday it opposed Iwata because he advocates changing the central bank law to give the government more control in setting policy.

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