Reuters: US Dollar Report: FOREX-U.S. dollar surges to 7-month high after strong data

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FOREX-U.S. dollar surges to 7-month high after strong data Mar 13th 2013, 14:27 Wed Mar 13, 2013 10:27am EDT * Retail sales posts largest rise since September * U.S. economy outperforms, lifting dollar sentiment * Euro hurt by higher Italian bond yields after auction By Wanfeng Zhou NEW YORK, March 13 (Reuters) - The dollar rallied to a seven-month high against a basket of currencies on Wednesday after strong U.S. retail sales data boosted expectations the U.S. economy is outperforming other advanced markets. The Commerce Department said on Wednesday retail sales increased 1.1 percent, the largest rise since September, after a revised 0.2 percent gain in January. The dollar index, which tracks the greenback versus a basket of currencies, rose to 83.023, the highest since Aug. 3. "Strong activity numbers will help maintain investor expectations that the U.S. economic recovery is best placed amongst G-3 to begin gaining traction this year," said Samarjit Shankar, managing director of global FX strategy at BNY Mellon in Boston. Broad dollar strength pushed the euro down 0.8 percent on the day to $1.2924. The single currency had hit a session low of $1.2922, the weakest since Dec. 10. Trading volume surged, with some $1.5 billion in euros changing hands on Reuters dealing in the last two hours, compared to an average of $4.13 billion over the past five days. The euro also came under pressure as an Italian debt auction saw weaker demand, sending borrowing costs higher on political uncertainty in Italy. "The headline yields and the fact they had to pay slightly more than last time was a tad disappointing," said Neil Jones, head of hedge fund FX sales, at Mizuho Corporate Bank. "I can understand the hesitancy (for Italian debt) and that is why the yields are higher and this has weighed on the euro as well." Against the yen, the euro was down 0.8 percent at 124.25 yen. The dollar was little changed at 96.11 yen, recouping losses after the release of strong U.S. retail sales data. Analysts said yen weakness was firmly intact and it would continue to trend lower after dovish former currency diplomat Haruhiko Kuroda takes over as the Bank of Japan's next chief. Kuroda, whose nomination along with Kikuo Iwata and Hiroshi Nakaso as deputy governors, is expected to be signed off by the Japanese parliament later this week. All have vowed to pursue radical measures to lift Japan's inflation rate to two percent - something that has not happened for almost two decades. Link this Share this Digg this Email Reprints

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