(Adds details, comments, updates prices, changes byline)
* Dollar gains on retail sales ex-autos, import price data
* Data supports views Fed will not cut rates in June
By Vivianne Rodrigues
NEW YORK, May 13 (Reuters) - The U.S. dollar rallied
broadly on Tuesday after a report on April retail sales beat
forecasts and supported views that the Federal Reserve will
probably stop cutting interest rates next month.
Retail sales, excluding the hard-pressed autos sector,
increased 0.5 percent, more than double the increase that
economists had forecast. That followed a 0.4 percent pickup in
March, suggesting that the U.S. consumer remained resilient
despite the housing market rout.
The reading bolstered the dollar as consumer spending
accounts for about two-thirds of the U.S. economy.
"The U.S. consumer is out there and still spending," said
Kurt Karl, a U.S. chief economist at Swiss Re in New York. "As
for the Fed, given the recent data, it wouldn't be a bad thing
to stop for a while at 2 percent."
The euro dropped earlier to a session low of $1.5431
<EUR=>. In late trading, it was down 0.4 percent at $1.5479.
The New York Board of Trade's dollar index, which tracks the
dollar's performance against a basket of currencies, rose 0.4
percent to 73.246 <.DXY>.
Short-term interest rate futures <FFG8>, which track market
expectations for Fed policy, showed a 92 percent perceived
chance that the central bank would leave benchmark lending
rates unchanged next month.
The fed funds target rate has been lowered by 3.25
percentage points since mid-September 2007, undermining the
dollar's appeal to investors seeking higher returns.
"Today we saw the strength of the consumer with retail
sales being better than what the market expected, especially in
household goods, which shows us consumers are still resilient"
said Boris Schlossberg, senior currency strategist at
DailyFX.com in New York.
"That will provide a floor underneath Fed rates for the
time being and benefit the dollar as we go forward," he added.
San Francisco Federal Reserve Bank President Janet Yellen
said on Tuesday the current level of U.S. interest rates should
boost the economy in the second half of the year. For details,
see []
CREDIT AGRICOLE HURTS EURO
Sentiment toward the euro was also soured by a rights issue
from France's Credit Agricole <CAGR.PA> after it reported
write-downs related to the U.S. subprime mortgage sector.
This indicated the euro zone is not immune to the problems
in the United States and analysts are convinced that growing
signs of a slowdown in economic activity in the euro area will
force the European Central Bank to cut interest rates at some
point this year.
Analysts said euro/dollar faced support around $1.5260 in
the near term, adding more bad news out of the euro zone would
be needed for a break below that level, which could see the
currency pair making stabs at $1.50.
Against the yen, the dollar jumped to a session high of
104.92 yen <JPY=>. It was last trading at 104.77 yen, up 1
percent on the day and shrugging off mixed U.S. shares.
Analysts said the dollar had also been boosted by a
government report showing a slight rise in U.S. import prices
in April, which pointed to growing inflationary pressures.
"One thing that the market has not focused on, but will,
when it comes to interpreting Fed policy is the import prices
that are up sharply. Inflation is firmly becoming rooted," said
Axel Merk, portfolio manager at Merk Hard currency in Palo
Alto, California.
"Cutting rates further is not going to boost the economy
much, it's going to foster further inflationary pressures," he
added.
Import prices rose 1.8 percent in April. []
The market was little moved by Fed Chairman Ben Bernanke's
comments that the central bank's liquidity measures had helped
relieve strain in financial markets, but that the recovery
process remained incomplete.
(Additional reporting by Lucia Mutikani and Gertrude
Chavez-Dreyfuss; Editing by Gary Crosse)
