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Dollar falls after weak retail sales data

Dollar dips after Fed calms U.S. inflation jitters

By Kate Duguid

NEW YORK (Reuters) – The U.S. dollar edged lower against major currencies on Friday after a report that U.S. retail sales unexpectedly stalled in April and as fears of accelerating inflation receded.

The greenback <=USD> was down half a percent against a basket of currencies, last at 90.341, retracing most of the gains made earlier this week after data showed a surprise surge in consumer prices.

The Commerce Department said on Friday that retail sales were unchanged in April after recording a 10.7% surge in March, boosted by stimulus checks. But another acceleration in retail sales is likely in the coming months as the U.S. economy reopens and Americans spend the savings they have been amassing.

“The U.S. dollar pared more of its weekly gain Friday after disappointing news on America’s main growth engine, the consumer, added more evidence of an uneven recovery,” wrote Joe Manimbo, senior market analyst at Western Union Business Solutions.

Friday’s drop erases some of a two-day rally in the dollar after data on Wednesday showed U.S. consumer prices increased by the most in nearly 12 years. While the Fed has pledged to keep interest rates low even as inflation rises, some in the market have bet that the Fed will be forced to act sooner than expected. Higher interest rates strengthen the dollar.

“Tepid data serves as a strong vote of confidence in the Fed’s low rate outlook, a dovish stance and a key vulnerability for the dollar,” said Manimbo.

The euro was among the gainers against the dollar on the day, up 0.46% at $1.213. Wall Street also bounced back on Thursday and Friday after falling earlier in the week. The return of risk appetite that bolstered U.S. stocks also helped to support the euro.

The pound is on track to gain more than 0.75% this week, on bets of a strong economic recovery in Britain and expectations that any Scottish independence referendum could be a ways off.

In cryptocurrencies, Bitcoin is down more than 13% this week after Tesla boss Elon Musk said he would stop accepting the token as payment due to environmental concerns. It was moderately stronger on Friday, up 1.87% to trade at $50,689.11.

(Reporting by Kate Duguid; additional reporting by Iain Withers in London. Editing by Jane Merriman)

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