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FOREX-Dollar down vs yen on data; Greece weighs on euro

Published 01/14/2010, 04:41 PM
Updated 01/14/2010, 04:45 PM

* Dollar falls vs yen on retail sales, jobless claims

* ECB keeps rates on hold, Trichet mentions strong dlr

* Concern about Greece weighs on euro

* Aussie boosted by better-than-expected jobs data (Recasts, updates prices, adds detail)

NEW YORK, Jan 14 (Reuters) - The dollar fell against the yen on Thursday as a drop in December U.S. retail sales and other data reinforced the view the U.S. Federal Reserve will keep its benchmark interest rate unchanged for the foreseeable future.

But the U.S. currency held gains against the euro after the European Central Bank kept its rate policy unchanged, as expected, and President Jean-Claude Trichet reiterated the importance of a strong dollar. For details, see [ID:nFAE005571]

Economic reports showed U.S. retail sales unexpectedly fell in December from November, while jobless claims rose last week. [ID:nN14168822] and [ID:nLDE60D1LB]

Analysts said the combination of Thursday's data and a weaker-than-expected payrolls report last Friday raised concern about the outlook for the global economy. In the United States the expectation is for the Fed to leave the benchmark interest rate near zero.

"The U.S. continues to recover at a really slow pace," said Joe Manimbo, a currency trader at Travelex Global Business Payments in Washington, D.C. "If you add that to last week's jobs data, that certainly dampens expectations of an early Fed rate hike. Consequently, that sets the stage for a weaker dollar."

In late afternoon trading in New York, the dollar was 0.2 percent lower at 91.18 yen , off the session low of 90.85 yen, according to Reuters data. It traded as high as 92.04 yen before the release of the U.S. economic data.

ECB ON HOLD

Sentiment toward the U.S. dollar was knocked earlier by New York Federal Reserve Bank President William Dudley and Chicago Fed President Charles Evans, who said separately on Wednesday the U.S. central bank would need to be certain the economic recovery was firmly in place before tightening monetary policy

Meanwhile, the ECB kept its main interest rate on hold at a record low of 1 percent for the eighth month running. It also left its overnight deposit rate, which acts as a floor for money markets, at 0.25 percent and its marginal lending rate at 1.75 percent. [ID:nFAE005568]

The euro reacted little to the ECB decision but lost ground after Trichet commented on the dollar. He also mentioned Greece and said the country had much work ahead. [ID:nLDE60D0V8].

Trading in a range of about a cent between $1.4447 and $1.455 during the day, the European currency was last down 0.1 percent at $1.4501 .

GREEK WOES

Investor confidence in Greece has fallen as its deficit has ballooned and credit ratings have been cut, which also weighed on the euro in the past couple of months.

Trichet said the idea of a country such as Greece leaving the euro zone was "absurd," but warned that there would be "no special treatment" from the ECB if one of the euro's 16 member countries looked in serious economic danger.

The spread between Greek and benchmark German government bonds widened, and Greek credit default swaps hit a record high on Thursday [ID:nLDE60D0US], even as the Greek government presented parts of a three-year plan to slash its budget deficit [ID:nLDE60D0QY].

"A lot of people are very cautious about the fiscal situation in Greece," said Niels Christensen, currency strategist at Nordea in Copenhagen. "This seems to have stopped the uptrend in euro/dollar."

International Monetary Fund chief Dominique Strauss-Kahn said on Thursday that the euro zone does not need assistance to sort out the Greek fiscal crisis. [ID:nPAB008096].

The Australian dollar rose against the yen and hit a two-month high versus the U.S. dollar earlier after data showed Australia's jobless rate at an eight-month low, adding to the case for higher interest rates. [ID:nSGE60C06P]

The Australian dollar was last up 0.8 percent at $0.9316 , according to Reuters data.

Investors also awaited U.S. corporate earnings, with results from JPMorgan Chase & Co, due Friday. (Reporting by Nick Olivari and Vivianne Rodrigues, additional reporting by Steven C. Johnson and Wanfeng Zhou in New York, and Tamawa Desai in London, Editing by Chizu Nomiyama)

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