NEW YORK: The dollar strengthened against the yen and other major currencies after the Group of Seven backed Japan’s efforts to spur growth through aggressive asset purchases, while oil and gold prices fell on the stronger greenback.
A surprise rise in US retail sales in April supported views that the US economy, the world’s biggest, remains resilient. The optimistic tone to the data supported the dollar’s recent strength, and JPMorgan raised its outlook for second-quarter growth.
“The dollar’s strength from last week carried over into today’s trading, helped by the retail sales data, which pushed the dollar higher across the board,” said Win Thin, global head of emerging market currency strategy at Brown Brothers Harriman in New York.
The renewed optimism on the US economy after the retail sales data drove down prices of Treasuries, a traditional safe-haven. In over a week, the yield on the 10-year not has risen 0.30 percentage point from its lowest level of the year following the better-than-expected April jobs report and the dollar’s surge against the yen.
The dollar, which has risen 5 percent against a basket of major currencies since February, and double that versus the yen, looked unlikely to buckle after G7 officials meeting over the weekend in Britain showed little concern about the Japanese currency’s slump.
The dollar index last traded up 0.14 percent at 83.256, within striking distance of its highest level of the year set last week.
The greenback hit a 4-1/2-year high of 102.14 yen in Asian trading, but clung to a marginal 0.08 percent rise at 101.92 yen following the latest US retail sales figures. The euro edged up 0.1 percent against the dollar at $ 1.2975.
“Yen selling will have been encouraged by the outcome from the G7 meeting, where officials reiterated that they will tolerate yen weakness as long as it results from the use of domestic instruments to stimulate the Japanese economy,” said Lee Hardman, a currency analyst with Bank of Toyko-Mitsubishi.
Brent oil prices briefly slipped below $ 103 a barrel and were down 88 cents from late Friday at $ 103.03, with ample supply weighing on sentiment as well as the stronger dollar.
On Wall Street, the broad S&P 500 index nearly reversed early losses on profit-taking following last week’s stellar run to record highs, while weakness in the top European banking sector knocked the region’s share prices lower.
“The value of the dollar has weighed on the prices of all commodities, especially the more sensitive ones such as oil and gold,” said Harry Tchilinguirian, head of commodity market strategy at BNP Paribas.
A stronger dollar makes dollar-denominated commodities such as oil more expensive for holders of other currencies.
Weaker-than-expected industrial output data from China also helped push oil prices lower. London copper, however, climbed 0.09 percent to $7,382 a ton, as the data raised hopes that monetary authorities in the world’s biggest metals consumer may embark on further easing to underpin demand.
