Industrial production data boosts euro, Hatoyama undercuts Japanese yen By Deborah Levine & William L. Watts, MarketWatch NEW YORK (MarketWatch) -- The U.S. dollar declined versus the euro on Friday as the shared currency was supported by strong economic data and more confidence that Greece will recover. The greenback pared losses after better-than expected retail-sales data and a surprise decline in consumer confidence. The dollar index (DXY 79.99, -0.33, -0.42%) , which measures the U.S. unit against a trade-weighted basket of six major currencies, traded at 79.990, compared to 79.907 before the sentiment report but down from 80.542 in late North American trading on Thursday. The index is headed for its biggest weekly drop since November, from 80.432 last Friday. The euro rose to $1.3738, paring an earlier gain though still above $1.3680 late Thursday. The shared currency is headed for its highest weekly close in seven weeks. The dollar traded at 90.86 Japanese yen, up from 90.50 yen Thursday. Get live yen quotes and currency charts. The U.S. Commerce Department said retail sales unexpectedly rose last month by 0.3%. Excluding autos, sales jumped 0.8%. See story on retail sales. "The February retail sales data was impressive, and suggests the U.S. recovery is gathering steam," said Alan Ruskin, head of currency strategy at RBS. "The data is a mixed bag for the dollar, with the rate implications clearly U.S. dollar positive, but the risk implications seen as dollar negative." Analysts said the data should prompt more optimism from the Federal Reserve when officials meet next week. Any indication that policy makers may be closer to raising interest rates should support the U.S. currency. Still, the dollar remains vulnerable to sales from investors who had bought it in a flight to safety. More willingness to buy riskier assets, including stocks and high-yielding currencies, will weigh on the dollar. "The dollar's strength against higher yielding currencies should be limited once U.S. equity markets open as a recovery in risk appetite encourages flows out of the dollar and into the euro, British pound and Aussie," said Kathy Lien, director of currency research for GFT. In recent action, the British pound rose 0.5% versus the dollar while the Australian dollar was higher earlier but lately traded little changed against the U.S. currency. Also vying for attention, the Reuters/University of Michigan index on consumer sentiment declined to 72.5 in March from 73.6 in February, according to reports. In European activity, the euro traded as high as $1.3796, taking out resistance at the $1.3770 to hit its highest level versus the dollar since mid-February. The single currency got a boost from data showing industrial production in the 16-nation euro zone posted a record 1.7% monthly jump in January. Read about the euro-zone industrial production data. Despite ongoing strikes in Greece, ideas that the Greek government's austerity measures and vague commitments by European leaders to provide support for Athens have soothed worries over the country's ability to meet its debt obligations, said Michael Hewson, analyst at CMC Markets. Canada, Asian news The Canadian dollar strengthened to its highest level in more than a year versus its U.S. counterpart after data showed Canada's jobless rate fell to its lowest level since April 2009. See more on Canadian dollar. The Japanese yen initially lost ground in Asian hours after Japanese Prime Minister Yukio Hatoyama told parliament the yen was too strong. Hatoyama said, "I think we need to take firm steps against such yen strength," but didn't specify any steps. Explicit references by top leaders to the currency's strength are uncommon. Analysts said the yen may gain in coming weeks as Japanese companies begin repatriating overseas earnings. Read about potential encore for yen's glory days. Also Friday, a report in Japanese business daily Nikkei said the Bank of Japan's meeting next week may focus on a proposal to increase lending. See full story on BOJ easing report.

Source