* U.S. retail sales fall in April for a second month
* Dollar rebounds from seven-week low vs euro
* Renewed risk aversion leads to slide in high-yielders
(Adds comments, details, changes byline)
By Vivianne Rodrigues
NEW YORK, May 13 (Reuters) - The dollar rallied broadly on
Wednesday after an unexpected decline in April's U.S. retail
sales rekindled demand for the greenback as a safe haven.
The report, which showed sales at U.S. retailers slipped
0.4 percent last month, dimmed optimism about hopes for a rapid
recovery in the world's largest economy. Economists polled by
Reuters had forecast April sales would be flat after falling in
March. For story on retail sales data, see []
After being sold off the past few weeks, the dollar rose
from four-month lows against a basket of six currencies and
seven-week troughs against the euro. It also gained sharply
against some higher-yielding currencies, such as the Australian
and New Zealand dollars, which tracked a slide in Wall Street
stocks.
"Green shoots of a global recovery were hit by a round of
frosty economic data today," said Vassili Serebriakov, a
currency strategist, at Wells Fargo Bank in New York. "The U.S.
consumer still appears under significant pressure with retail
sales unexpectedly falling."
"The greenback is somewhat firmer today, although still
reversing only a fraction of its recent decline," he added.
The dollar's uptrend this past year was consistent with
safe-haven flows as a global slowdown accelerated, with
investors brushing off the country's extreme fiscal weakness.
But that support is expected to fade once investors price in
the United States' enormous debt load over the next several
years.
In afternoon trading in New York, the euro was 0.5 percent
lower near a session low of $1.3567 <EUR=>, according to
Reuters data. The European currency earlier hit a seven-week
high of $1.3721.
The ICE Futures' dollar index, which measures the value of
the dollar against a basket of major currencies, rose 0.2
percent on the day to 82.440 <.DXY>, having hit a four-month
low of 81.871.
Serebriakov said weak U.S. data later this week may boost
risk aversion and pave the way for the dollar to rebound to the
1.32 level against the euro. But much of that reaction will
depend on equity and commodity markets' reaction, he said.
The dollar fell earlier to fresh lows after an article in
the Financial Times flagged a risk of the United States' losing
its top sovereign credit rating.
While analysts warned against reading too much into the
article since the United States has run persistent and growing
budget deficits for years, they said a downgrade would have
huge economic, political and financial implications.
"If the U.S. loses its rating, we could see a massive
outflow of foreign investment," said Kathy Lien, director of
foreign exchange research at GFT Forex in New York. "Also, a
downgrade is the perfect excuse to push through an alternative
reserve currency to replace the dollar because it would strip
the confidence of sovereign funds like China that have been
buying dollars to prop up the U.S. economy."
STERLING SLIDES
Sterling fell against the dollar after the Bank of England
said it expects anemic UK inflation and the economy to recover
more slowly than previously thought. The pound was down 0.9
percent on the day at $1.5141 <GBP=>.
The British currency's sharp fall relieved some of the
selling pressure on the dollar that had intensified since last
week's break below key 200-day and 200-week moving average
support levels on technical charts.
The euro has also broken above similar moving averages
against the dollar.
Meanwhile, the dollar slid 0.7 percent against the yen to
95.72 <JPY=>, a two-week low. Talk about the potential for fund
repatriation flows from Japanese investors related to
redemptions and coupon payments on U.S. Treasuries this week
also helped push the dollar lower against the yen, traders
said.
The Australian dollar fell 1.5 percent to US$0.7533 <AUD=>,
while the New Zealand dollar dropped 2.2 percent to US$0.5916
<NZD=>.
(Additional reporting by Gertrude Chavez-Dreyfuss in New
York; Editing by Kenneth Barry)
