By Deborah Levine & William L. Watts, MarketWatch
NEW YORK (MarketWatch) -- The U.S. dollar gave up some gains against major currencies on Friday after a report showed a better- than-expected gain in consumer confidence, bolstering stocks and decreasing the appeal of the greenback's relative safe haven status.
The dollar index (DXY 87.32, +0.15, +0.17%) , which tracks the U.S. unit against a basket of six major currencies, rose to 87.304, up from 87.080 in late North American trading on Thursday.
The euro (CUR_EURUSD 1.2104, -0.0002, -0.0165%) traded at $1.2113, 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% against the dollar to $1.4576.
Against the Japanese yen, the euro (CUR_EURYEN 110.9100, +0.2600, +0.2350%) dropped sharply to buy ¥110.12, compared to ¥110.59 on Thursday. The U.S. dollar recovered gains notched earlier, buying ¥91.74 from ¥91.30 a day earlier.
The yen is also often a beneficiary when investors flee assets deemed riskier.
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.
"The data is going to lead to some downward revisions to GDP forecasts," said Alan Ruskin, head of currency strategy at RBS. "This data then certainly fits with a sub-par recovery with tentative evidence of some lost momentum into the spring."
The report "but will introduce a serious note of caution to the long risk trade going into the weekend," he said.
The Reuters/University of Michigan consumer sentiment index increased to 75.5 in June from 73.6 in May, according to media reports.
"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."
Strategists said an unexpected drop in April manufacturing output and industrial production contributed to the weaker tone. Read about U.K. economic data.
