By Deborah Levine & William L. Watts, MarketWatch
NEW YORK (MarketWatch) -- The dollar rose against the euro, Japanese yen and British pound on Friday after a weak retail sales report for the U.S. weighed on stocks and increasing the appeal of the greenback's relative safe haven status.
This data "certainly fits with a sub-par recovery with tentative evidence of some lost momentum into the spring," said Alan Ruskin, head of currency strategy at RBS. The report "but will introduce a serious note of caution to the long risk trade going into the weekend."
The dollar index (DXY 87.50, +0.33, +0.38%) , which tracks the U.S. unit against a basket of six major currencies, rose to 87.463, up from 87.080 in late North American trading on Thursday.
The euro (CUR_EURUSD 1.2069, -0.0037, -0.3056%) fell to $1.2079, from $1.2116 Thursday. The single currency is down about 16% so far this year.
The British pound extended a decline from before the data, lately falling 1.1% against the dollar to $1.4549.
Against the Japanese yen, the U.S. dollar recovered gains notched earlier, buying ¥91.75 (CUR_USDYEN 91.6900, +0.3000, +0.3282%) from ¥91.30 a day earlier.
The euro (CUR_EURYEN 110.6400, -0.0100, -0.0090%) gave up most of its earlier gains to buy ¥110.81, compared to ¥110.59 on Thursday.
The yen is also often a beneficiary when investors flee assets deemed riskier.
For the week, the dollar has given up ground versus most major currencies as a lack of negative news, particularly involving European debt, gave investors enough comfort to move into assets considered riskier.
The dollar index has slipped from 88.233 a week ago. The euro has ticked higher, from $1.204 last Friday, after falling for six of the previous seven weeks.
A week ago, the dollar bought ¥91.92 and the British pound bought $1.4560.
The S&P 500 Index (SPX 1,083, -3.35, -0.31%) recently traded down by 0.2%.
Earlier, the dollar got a boost from a report showing U.S. retail sales dropped 1.2% in May, the first time since September. Excluding autos, sales fell 1.1%. Read about retail sales.
"To everyone's surprise, American consumers cut spending despite the continual improvement in the labor market, said Kathy Lien, director of currency research at GFT. "Finding jobs was not enough to get Americans to spend as today's number suggests that quality of jobs is far more important than the quantity."
The Reuters/University of Michigan consumer sentiment index increased to 75.5 in June from 73.6 in May, according to media reports. See more on consumer confidence.
"This report provides a partial antidote to today's retail sales report," said economists at RDQ Economics.
Before the U.S. data, the euro was its mixed a day after Germany's constitutional court refused to immediately block the nation's contribution to a euro-zone rescue fund. Read about the court decision.
Traders said overall risk appetite picked up somewhat after China reported an 18.7% rise in retail sales. Read more on China's data.
"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," said Jane Foley, research director at Forex.com.
European news
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.
Also, 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."
In the U.K., an unexpected drop in April manufacturing output and industrial production contributed to the weaker tone for the British pound, analyst said. Read about U.K. economic data.
