The euro fell after retail sales in Germany, Europe's largest economy, unexpectedly dropped for a second month in April.
The U.S. currency traded near a three-month high versus the yen as
traders increased bets the Federal Reserve will raise interest rates
later this year as the Bank of Japan and the European Central Bank
remain on hold.
``There's been an improvement in some bits of data in the U.S. and the
equity market looks like it's on the way up on a trend basis,'' said
Peter Frank, a currency strategist in London at Societe Generale SA,
France's second-biggest bank by market value. ``There's a very big
turnaround in the risk environment. As long as oil keeps coming down,
that combination is positive for the U.S. dollar.''
The euro fell against the dollar and the U.K. pound after a report
suggested the German economy is losing momentum as faster inflation
erodes consumers' spending power.
Sales at German retailers, adjusted for inflation and seasonal swings,
fell 1.7 percent from March, when they dropped 2.2 percent, the Federal
Statistics Office in Wiesbaden said today. Economists in a Bloomberg
News survey forecast a gain of 0.6 percent.
``Consumption in Germany is cooling down due to hefty oil prices,''
said Ryohei Muramatsu, manager of Group Treasury Asia in Tokyo at
Commerzbank AG, Germany's second-largest bank. ``In such a situation,
the Fed could raise rates faster than the ECB.'' The euro may fall to
$1.52 by June 30, Muramatsu said.
Britain's pound will fall to a record against the
euro in coming months as a weakening economy prompts investors to
resume bets the Bank of England will add to interest rate cuts this
year, according to Dresdner Kleinwort.