By Ye Xie and Lukanyo Mnyanda Aug. 13 (Bloomberg) -- The dollar declined versus the yen after U.S. retail sales unexpectedly fell last month. The euro advanced versus the dollar earlier after a report showed Europe’s economy shrank less than economists predicted in the second quarter, and France and Germany unexpectedly grew. The dollar and the yen pared their earlier losses against a majority of the most-traded currencies as the decline in retail sales prompted trades to reduce bets that assets tied to global growth will appreciate. “The retail sales report highlights that there’s still significant headwinds for consumers,” said Vassili Serebriakov, a currency strategist at Wells Fargo Bank in New York. “The euro-zone data sparked enthusiasm of recovery and risk seeking. That was partially reversed after the retail sales number.” The dollar declined 0.4 percent to 95.65 yen at 8:58 a.m. in New York, from 96.06 yesterday. The greenback dropped to $1.4297 per euro from $1.4188. Europe’s currency climbed 0.3 percent to 136.78 yen, from 136.32 yen. U.S. retail sales fell 0.1 percent in July, after gaining a revised 0.8 percent the prior month, the Commerce Department said in Washington. The median forecast of 76 economists in a Bloomberg News survey was for an increase of 0.8 percent. The yen had weakened earlier after the European data indicating that the recession in the euro-region is ending sparked investors to seek higher-yielding assets. Japan’s currency reversed its earlier decline versus the Canadian dollar and gained versus the Singapore and Taiwanese currencies after the U.S. report. German Growth The euro gained after the European Union’s statistics office in Luxembourg said gross domestic product fell 0.1 percent from the first quarter. Analysts estimated a decline of 0.5 percent in the period, a Bloomberg survey showed. “We’re getting pretty excited about these numbers, seeing big hitters in euro land moving back into the black, and that’s why the euro is higher,” said Neil Jones, head of European hedge-fund sales at Mizuho Corporate Bank Ltd. in London. The euro also strengthened after Germany’s Federal Statistics Office said gross domestic product expanded a seasonally adjusted 0.3 percent from the previous three months. France’s economy rose 0.3 percent in the second quarter, national statistics office Insee said today in Paris. Economists expected the German and French economies to shrink by 0.2 percent and 0.3 percent, respectively, according to separate Bloomberg surveys. The data “may really lend credence to the view that we could be reaching a bottom,” Ashraf Laidi, chief market strategist at CMC Markets in London, said in an interview on Bloomberg Television. “In the short term we might see a nice pop in the euro.” For Related News and Information: Bond yield forecasts: BYFC Top bond market news: TOP BON World bond markets: WB Sovereign debt monitor: SOVR Credit crunch page: WWCC Short-term liquidity SLIQ

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