The dollar rallied against most major currencies on Wednesday after news that U.S. retail sales declined unexpectedly in April, dimming optimism about hopes for a rapid recovery in the world's largest economy.
The report, which showed sales at U.S. retailers slipped 0.4 percent last month, burnished the appeal of the dollar as a safe-haven currency. Economists polled by Reuters had forecast sales would be flat in April after falling in March.
The dollar rose from four-month lows against a basket of other major currencies and seven-week troughs versus the euro.
"The 'green shoots' rally was ready for a bit of a correction and we already started to see that overnight. This report is likely going to feed into it," said Michael Woolfolk, senior currency strategist at Bank of New York Mellon in New York.
He added that the retail sales data should be a boost for the dollar and negative for the euro, but he pointed out that the report "doesn't tell us more than we already know, which is that consumers continue to lose their jobs and are unlikely to be out spending money in retail stores."
The dollar fell earlier to fresh lows after an article in the Financial Times flagged a risk of the United States losing its top sovereign credit rating.
In early New York trading, the euro fell to session lows against the dollar to $1.3573, according to electronic trading platform EBS in the wake of the data, but last traded at $1.3602, down 0.3 percent on the day. The euro earlier hit a seven-week high of $1.3722 on EBS.
The ICE Futures' dollar index, which measures its performance against a basket of six other major currencies, rose 0.3 percent on the day at 82.535 .DXY, having hit a four-month low of 81.871.
The dollar slid 0.3 percent to 96.07 yen from 96.30 before the data.
