Wed Jul 14, 2004
By Mariko Hayashibara
TOKYO (Reuters) - The dollar was little changed against major currencies early on Thursday as investors awaited key U.S. inflation figures later in the day and on Friday that will give more hints about the direction of U.S. interest rates.
The dollar briefly eased after U.S. retail sales data showed consumer spending slowing. Analysts said that would keep the Federal Reserve on a path of gradual interest-rate rises.
But the reaction was short-lived and the dollar recovered as investors adjusted positions after selling the dollar heavily in recent weeks.
"The forex market is completely dead this morning because all the focus is on U.S. inflation data such as the producer price index (PPI) and consumer price index (CPI), which are having difficulties making a judgment about," said Mitsuru Sahara, vice president of UFJ Bank's forex dealing group.
"Retail sales data was weak, but if these inflation data turn out strong, this could affect the Fed's rate decision," he said.
U.S. retail sales slid 1.1 percent in June, worse than economists' forecasts of a 0.6 percent fall. Excluding a large decline in auto sales, retail purchases fell 0.2 percent.
More moderate U.S. interest rate increases would likely diminish the allure of dollar-denominated assets to foreign investors.
The dollar traded at 109.15 yen, barely moved from late New York level. The euro also unmoved, standing at $1.2385.
Against the Swiss franc and the sterling, the dollar was also flat at 1.2290 francs and $1.8560.
Analysts expect tepid U.S. inflation numbers would keep the dollar on the defensive.
The U.S. producer price report is due later in the day at 8:30 a.m. EDT, with markets forecasting a rise of 0.2 percent. Consumer price data is due on Friday and the median forecast is for a 0.2 percent increase.
Investors are also on the lookout for U.S. initial jobless claims data, New York Fed manufacturing survey for July and June industrial production data all due release later in the day.
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