By William L. Watts & Myra P. Saefong, MarketWatch
LONDON (MarketWatch) -- The U.S. dollar was mixed versus most major rivals Friday, while the European single currency held its ground a day after Germany's constitutional court refused to immediately block the nation's contribution to a euro-zone rescue fund.
Traders said overall risk appetite picked up somewhat after China reported an 18.7% rise in retail sales. Investors are looking ahead to U.S. data later in the session. Read more on China's data.
Market participants, however, showed a "clear reluctance" to add to risk positions in European trade, stock indexes up only slightly and gold and yen crosses in consolidation mode, said Jane Foley, research director at Forex.com.
"While there has been good economic news this week from countries that include China, Japan, Australia and Italy the market is mindful of last week's disappointing U.S. jobs report and the likelihood that the age of fiscal repair and bank reform will have a dampening impact on economic growth," she said.
The dollar index (DXY 87.09, -0.08, -0.09%) , which tracks the U.S. unit against a basket of six major currencies, stood at 87.116, up slightly from 87.080 in late North American trading on Thursday.
The euro (CUR_EURUSD 1.2134, +0.0028, +0.2313%) traded at $1.2124, up slightly from $1.2116 Thursday. The single currency is down about 16% so far this year.
Sovereign debt fears, while not dispelled, were soothed by another solid auction of government debt Friday. Italy's sale of 27- and 7-year bonds were both well-received, noted strategists at UBS.
Meanwhile, a Spanish economics ministry spokesperson said the country had not requested an aid package from the European Union and was not going to do so, Reuters reported. The denial followed a story in Friday's FT Deutschland newspaper that said EU officials were readying an aid package in the event Spain's banking woes forced Madrid to seek assistance.
Meanwhile, ECB President Jean-Claude Trichet's refusal to offer substantial details Thursday of the central bank's bond-buying plan are likely to keep a lid on the single currency, said Geoffrey Yu, currency strategist at UBS. Read about Trichet's monthly news conference.
"Its reserved policy threatens to give the impression that the ECB is lacking a credible strategy and also a credible exit strategy," Yu said. "As a result, the euro is suffering, as there are already enough problems within the euro zone."
However, the German constitutional court's refusal Thursday to issue a temporary injunction blocking Germany's contribution to the 750 billion euro rescue plan has helped lift the euro, wrote strategists at BNP Paribas led by Hans Redeker. Read about the court decision.
They see scope for a near-term rebound by the euro if the single currency can breach the $1.2150 level. That would signal a recovery targeting the $1.2455 area they said, with intervening resistance at $1.2215 and $1.2330.
The British pound lost ground, falling 0.4% against the dollar to $1.4654.
Strategists said an unexpected drop in April manufacturing output and industrial production contributed to the weaker tone. Read about U.K. economic data.
Against Japan's yen, the euro (CUR_EURYEN 111.2600, +0.6100, +0.5513%) rose to ¥111.28 vs. ¥110.59 on Thursday, while the U.S. dollar bought ¥91.74 from ¥91.30 a day earlier.
U.S. retail sales and University of Michigan consumer confidence are due later Friday. See the economic calendar.
"We think continued positive data should be supportive, particularly for growth-sensitive commodity currencies" like the Australian and Canadian dollars, while they may limit the downside for the euro against the dollar, analysts at Credit Suisse said in a note to clients Friday.
