NEW YORK – The dollar index bounced off a one-year low against a basket of currencies on Friday after some March retail sales components were not as weak as some economists had feared, while a key Federal Reserve official warned that the US central bank needs to continue hiking interest rates to bring down inflation.
The dollar rebounded from an initial drop after data showed US retail sales fell more than expected in March as consumers cut back on purchases of motor vehicles and other big-ticket items.
Core retail sales, which correspond most closely with the consumer spending component of gross domestic product, slipped 0.3 percent last month. However, despite March’s fall, the gains in January and February put consumer spending firmly on track to accelerate in the first quarter.
“It was generally on the weak side with the exception of the retail sales control group, which is super core retail sales, it was just a little less negative than expected and makes you think that maybe the market was looking for something much weaker,” said Mazen Issa, senior foreign exchange strategist at TD Securities in New York.
Economists noted that in the context of a very strong January, the data still reflects a strong quarter.
“Personal consumption flattened out in February and March, but this followed a huge jump in spending momentum in January,” Jefferies money market economist Thomas Simons said in a note. “The bottom line is that the weakness in February and March looks distressing in isolation, but the quarterly averages are much stronger due to the spending spree in January.”
The dollar index gained 0.57 percent on the day at 101.53, after falling to 100.78, the lowest since last April. It remains on track for its fifth consecutive down week.
The euro fell 0.44 percent to $1.0999 after hitting $1.10755, the highest since last April.
The dollar gained 0.91 percent against the Japanese yen to 133.78. – Reuters
