The
dollar strengthened to a one- week high against the euro as U.S. retail
sales advanced in May more than economists forecast, raising
speculation the Federal Reserve will increase borrowing costs this
year.
An index gauging the dollar against the
currencies of six U.S. trading partners rose to the highest since
February. Crude oil fell as the stronger greenback made commodities
less attractive as an inflation hedge.
``The consumer
refuses to die,'' said Alan Ruskin, head of international currency
strategy at RBS Greenwich Capital Markets in Greenwich, Connecticut.
``That's helpful for the dollar.''
U.S. retail sales
increased 1 percent in May as Americans used their tax rebates to shop,
the Commerce Department reported. That followed a revised 0.4 percent
advance the prior month. The median forecast of 82 surveyed economists
was for a 0.5 percent increase.
``The key downside risk
to the dollar was the consumer,'' said David Watt, senior currency
strategist at RBC Capital Markets in Toronto. ``The tax rebates remove
that risk for a little while. It's certainly bullish for the dollar in
the short term. But it's a Band-Aid solution.''
Traders
bet Fed policy makers are more likely to raise borrowing costs in
August. Fed funds futures on the Chicago Board of Trade show a 60
percent probability the central bank will increase the target lending
rate by at least a quarter- percentage point, compared with a 7 percent
chance a week ago.
The U.S. currency was supported by
speculation that finance ministers from the Group of Eight countries
might make comments discouraging the currency's decline at two days of
meetings in Osaka, Japan, this weekend.
G-8 officials
will urge emerging nations to stop subsidizing oil consumption and
press regulators, notably in the U.S., to look into the trading that
has driven crude oil to a record, said French Finance Minister
Christine Lagarde.