BMO ,,, Dollar Continues Pressing Gains Against Euro
Thursday May 12, 11:52 pm ET
Boosted by Optimism in U.S. Economy, Dollar Continues Pressing Gains Against Euro
TOKYO (AP) -- The dollar continued pressing its recent gains against the euro Friday morning in Asia trading as fresh economic data boosted optimism about the U.S. economy. The euro dipped to $1.2683 Friday morning from $1.2763 late Thursday and to 135.44 yen from 135.48 yen.
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The dollar was trading at 106.77 yen late morning in Tokyo, up 0.57 yen from late Thursday and above the 106.75 yen it bought in New York later that day.
In New York, the dollar climbed to its highest level against the euro this year on Thursday, lifted by a strong U.S. retail sales report that boosted optimism about the U.S. economy. The dollar also rose against the Japanese yen and British pound.
The dollar advanced after the U.S. Commerce Department reported that U.S. retail sales in April rose 1.4 percent, the strongest showing in six months.
"We may be revising away some of the weakness (in the economy) we were expecting in the middle two quarters of the year," said John Rothfield, currency strategist at Bank of America in San Francisco. "We think over the next few months we could see significant improvement in the dollar" against the euro.
The dollar's surge dropped the euro to $1.2705, surpassing the previous low of $1.2733 set in February, and down from $1.2804 late Wednesday in New York.
The dollar continued its climb from Wednesday, when a smaller-than-expected U.S. trade deficit lifted the U.S. currency.
In recent years, worries about the ballooning U.S. trade deficit have weighed on the dollar, but that has come and gone as a market focus other factors that helped boost the American currency.
The yen has weakened this week after gaining the previous week on speculation that China was about to loosen its decade-long link between its currency, the yuan, and the dollar. With Chinese authorities making no such move, traders shifted expectations for changes in China's currency system -- such as allowing the yuan to trade in a wider band against the dollar or a basket of currencies -- until later this year.
U.S. officials have urged China to make its exchange rate policy more flexible, arguing that the dollar peg undervalues the yuan by as much as 40 percent. That makes Chinese goods cheaper for American consumers and U.S. products more expensive in China. Currently, the dollar trades at about 8.28 yuan.
The yuan would likely appreciate if it were allowed to float more freely, most analysts say, and that would also likely lift the yen against the dollar due to the close trade ties between Japan and China.
Traders say an appreciation of the yuan would also be welcomed by Japanese authorities because it would lessen China's price advantage, even if it also causes the yen to appreciate against the dollar. Last year, China surpassed the United States as Japan's No. 1 trading partner.
"China wouldn't have that benefit of the dollar peg, so the Japanese would feel they're competing on more equal ground" with China, said Tom Benfer, vice president in the foreign exchange group at Harris Nesbitt, a unit of Bank of Montreal.
AP Business Writers Malcolm Foster in New York and Matt Moore in Frankfurt, Germany contributed to this article.
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