US dollar lower after weak data, and as inflation fears ease

New York

THE dollar edged lower against major currencies on Friday after US retail sales unexpectedly stalled in April and as concerns about prospects of accelerating inflation receded.

The greenback was down half a per cent against a basket of currencies at 90.317, retracing most of the gains made earlier last week after data showed a surprise surge in consumer prices.

The Commerce Department said on Friday that retail sales were unchanged in April after a 10.7 per cent surge in March, boosted by stimulus cheques.

But another acceleration in retail sales appears likely in the coming months as the US economy reopens and Americans spend the savings they have been amassing.

Friday's drop erased some of a two-day rally in the dollar after data on Wednesday showed that US consumer prices increased by the most in nearly 12 years. While the Fed has pledged to keep interest rates low even as inflation rises, some bet that it will be forced to act sooner than expected, making the dollar more attractive.

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The combination of weak economic data - last week's non-farm payrolls report and retail sales on Friday - and evidence of stronger inflation has meant that the dollar has struggled to make much headway, wrote Jonas Goltermann, senior economist at Capital Economics.

"The prospects for monetary policy normalisation remain key. Minutes from the April Federal Open Market Committee meeting, released on Wednesday, may provide some further clues as to policymakers' intentions in that regard."

The euro was among the gainers against the dollar on the day, up 0.53 per cent at US$1.214. Wall Street also bounced back on Thursday and Friday after falling earlier in the week. The return of risk appetite that bolstered US stocks also helped to support the euro.

The pound gained roughly 0.80 per cent during the week on bets of a strong economic recovery in Britain and expectations that any Scottish independence referendum could be a ways off. REUTERS