* Dollar little changed, U.S. retail sales in focus
* Stock gains underpin carry trades and cross/yen pairs
* Sterling slips after weak UK housing and retail sales data
By Chikako Mogi
TOKYO, May 13 (Reuters) - The dollar was steady on Tuesday in
subdued trade, with many investors looking to U.S. retail sales
figures later in the day to decide if the Federal Reserve is
likely to keep interest rates steady in the months ahead.
Traders said more signs of slowing growth beyond U.S. shores
could help support the dollar, but doubts about whether the worst
of the credit market turmoil is really over would cap the
currency's gains.
Sterling dipped on more data showing the British economy is
being hit by falling property prices. House prices tumbled in
April by their widest margin since 1978 when the Royal
Institution of Chartered Surveyors began its survey.
[]
"The interplay between soggy activity data and elevated
inflation data has made for very choppy pound ranges," said
currency strategists at RBC Capital Markets in a note to clients.
Tuesday's figures on U.S. retail sales will show how well
consumer spending is holding up, while a slew of Federal Reserve
officials will speak on credit markets and the economic outlook
later in the day.
The Fed is now expected to keep rates on hold in the coming
months after having already slashed them to 2 percent, just as
speculation builds for rate cuts in other countries including
Britain and New Zealand.
Solid gains in regional equity markets helped boost
confidence in holding risky positions, helping higher-yielding
currencies hold most of the hefty gains they scored against the
yen on Monday. Japan's Nikkei share average <> rose 1.5
percent.
The dollar dipped slightly from late U.S. trade to 103.70 yen
<JPY=>. It had initially edged up to 104.00 yen as some market
players were forced to cover short positions, with the U.S.
currency's rebound on Monday taking them by surprise.
Some players had built up short positions late last week when
American International Group <AIG.N> posted a record quarterly
loss and Citigroup <C.N> said it planned to shed $400 billion of
assets, traders said.
AIG, the world's largest insurer, raised $11.9 billion on
Monday to help strengthen its balance sheet, after suffering
record losses in the past two quarters driven by write-downs of
derivatives linked to subprime mortgages. AIG said last week it
wanted to raise $12.5 billion. []
"Players are not sure about investor appetite for risk, but
they also seem less worried about credit market woes," a trader
at a Japanese bank said. "Market moves are technical, with lots
of short positions that players want to cover. So the dollar is
more prone to test the upside than the downside."
The euro was little changed at $1.5549 <EUR=> and 161.35 yen
<EURJPY=>.
Sterling fell 0.2 percent to $1.9544 <GBP=D4> but recovered
from the day's low of $1.9516. Market players are now awaiting
data on British consumer prices in April, which is expected to
show an acceleration.
U.S. retail sales are expected to show a dip of 0.1 percent
in April due to a big drop in auto sales. Excluding autos, sales
are forecast to rise 0.2 percent, slightly higher than in March.
Also on the radar are speeches by Fed officials, including
Fed Chairman Ben Bernanke, for clues on whether the U.S. central
bank will cut benchmark interest rates again next month.
Speculation is rising that the European Central Bank could
lower rates later this year on signs of slowing euro zone growth.
Higher-yielding currencies surrendered some of the hefty
gains from the previous day as a rally in Wall Street shares
spurred a return of carry trades. The Australian dollar shed 0.2
percent to 98.13 yen <AUDJPY=R> after having jumped 1.5 percent.
(Additional reporting by Eric Burroughs, Editing by Michael
Watson)
