NEW YORK - The dollar shot up a full percent against the euro and set new session highs against the yen on Tuesday, extending overnight gains after U.S. April retail sales logged their strongest rise since October 2001.þþThe greenback firmed overnight on the back of Monday's Wall Street stock rally. Analysts say the dollar will continue to take its cue from the performance of U.S. stocks, which also got an early boost from the retail sales data.þþThe government said retail sales surged 1.2 percent in April, well above expectations of a 0.7 percent rise, giving little indication that robust consumer spending, which has underpinned the U.S. economy, is flagging. Excluding autos, sales rose 1.0 percent in April, also eclipsing market expectations of a 0.4 percent increase.þþ``I would sure take this to be dollar-positive. We'll see how it goes for stocks, but I would think that stocks would like this number quite a bit,'' said Lara Rhame, U.S. economist, forex, Brown Brothers Harriman in New York.þþThe blue chip Dow Jones industrial average jumped 109 points, or more than 1 percent, to 10,218 in early trading, while the Nasdaq index added 47 points, or 2.8 percent, to 1,700.þþThe euro retreated more than a full cent from overnight highs, trading down near 90.15 cents(EUR-), its lowest since May 2. The dollar also rose sharply against the Swiss franc(CHF-), to 1.6150 francs, its highest since May 1.þþAdding to the euro's troubles, German economic research institute ZEW said its expectations indicator fell 4.3 points to 66.3 in May, casting further doubt on the sustainability of the recovery in Europe's biggest economy. The euro has also been pressured as German strikes -- the first major industrial action in seven years -- spread.þþ``The euro has a lot of mud to wade through at the moment, the three main negatives being the IG Metall strike, signs of growing inflation risks in the euro zone and the threat of a rightward shift in Dutch politics after Wednesday's elections,'' said Steve Barrow, currency strategist at Bear Stearns.þþAgainst the yen, the dollar traded up near 128.80 yen(JPY-), gaining more than 0.65 percent from the previous U.S. close. Overnight, Japan's top financial diplomat, Haruhiko Kuroda, repeated a verbal threat against excessive yen strength, saying it is important that currency rates should reflect fundamentals and that the Finance Ministry is watching the market closely.þþMoody's Investors Service said on Tuesday it would conclude its review on Japan by the end of May, dampening speculation of an imminent ratings cut.þþMARKET STILL CAUTIOUS ABOUT DOLLARþþAfter spending the past several weeks weighed down by doubts about the pace of the U.S. recovery, the dollar firmed on Monday, tracking Wall Street gains as the Dow industrials rose 1.71 percent, crossing the psychologically important 10,000 threshold.þþU.S. stocks extended those gains in early U.S. trading, but some analysts, pointing to U.S. industrial production data due on Wednesday, said the dollar would be hard-pressed to extend gains much further.þþ``(Retail sales) show there's a little more resilience (in the U.S. economy) than we had been thinking in recent days. It's more of a validation of the U.S. dollar rally of the past couple of sessions rather than a green light for significant further gains,'' said Sean Callow, currency strategist at IDEAGlobal. ``For now, caution is the order of the day.''þþIMM EURO FUTURES SAGþþJune euro futures sagged to an eight-session low of $0.9108 after the unexpectedly strong U.S. data. June yen also declined sharply to $0.007777, a three-session low.þþFloor traders, noting no especially large trades, only aggressive sales from all sectors, said the euro contract breached several technical support levels at $0.9026 and $0.9006.þþAnalysts said the euro is struggling under the sheer weight of euro long positions built up in recent weeks, after IMM speculators set record long euro positions for the third straight week in the week ending April 30.þþ
Source: NY Times
