Dollar rallies as retail sales gain fuels Fed taper speculation

The dollar rose for a second day after retail sales gained more than forecast last month, adding to speculation the Federal Reserve will move to trim its $85 billion of monthly asset purchases at a meeting next week.

The euro fell from almost a six-week high versus the dollar as data showed industrial production in the 17 nations that share the currency contracted in October, highlighting the uneven nature of the economic recovery. The Australian dollar declined versus all of its major peers as central bank governor Glenn Stevens said the currency needs to be weaker.

“Taper is discussed more as a threat right now that as a tool, but the possibility of it still supports the dollar,” Douglas Borthwick, the head of foreign exchange at Chapdelaine & Co. in New York, said in a phone interview.

The Bloomberg U.S. Dollar Index appreciated 0.4% to 1,017.69 at 3:32 p.m. in New York. The gauge fell as low as 1,011.73 on Dec. 10, its weakest level since Nov. 1.

The greenback gained 0.3% to $1.3746 per euro after falling to $1.3811 yesterday, its lowest level since Oct. 29. The U.S. currency climbed 0.9% to 103.30 yen. Japan’s currency slipped 0.6% to 142 yen per euro.

The JPMorgan Chase & Co. Global Volatility Index rose to 8.7%, its highest level in more than a week.

Krona, Rupee

Sweden’s krona fell versus the most of its major counterparts after the nation’s seasonally adjusted jobless rate climbed to 8% last month, from 7.9% in November. The median prediction in a Bloomberg survey was for the rate to be unchanged. Separate data showed inflation in the Scandinavian nation fell short of analyst estimates.

The currency fell for a sixth day against the euro, depreciating 0.6% to 9.0767 per euro after touching the weakest since May 22, 2012.

The Indian rupee fell versus all except one of its 31 major peers on speculation the U.S. will pare stimulus that has boosted inflows to emerging markets. The currency weakened 0.9% to 61.83 per dollar after earlier falling 1.1%, the most in a month. The rupee has dropped 11% this year.

Trading in over-the-counter foreign-exchange options totaled $45 billion, from $56 billion yesterday, according to data reported by U.S. banks to the Depository Trust Clearing Corp. and tracked by Bloomberg. Volume in options on the dollar- yen exchange rate amounted to $11.3 billion, the largest share of trades at 25%. Options on the euro-dollar rate totaled $8.2 billion, or 18%.

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