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FOREX-Dollar steadies, eyes on U.S. retail sales

Published 2016-08-12, 07:46 a/m
© Reuters.  FOREX-Dollar steadies, eyes on U.S. retail sales
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* San Francisco Fed chief gives nod to rate hike this year

* Week dominated by move into commodity-heavy currencies

* Limited reaction to weaker than expected Chinese data

* Focus on U.S. retail sales (Updates prices)

By Patrick Graham

LONDON, Aug 12 (Reuters) - The dollar held steady at the end of a week dominated by flows into higher-risk currency plays like the Australian and Canadian dollars on Friday, helped by a call for a rise in U.S. interest rates by San Francisco Federal Reserve chief John Williams. major currencies that carry marginally higher interest rates and are most closely aligned with commodity markets have all performed strongly this week as investors sought higher-yielding investments.

The Canadian dollar is up the most since April CAD= and Norway's crown has seen its best performance against the euro since the start of 2015. EURNOK=

Most of those currencies were flat to slightly lower on the day on Friday, but the Aussie is also up almost 1 percent for the week, while investors' reaction to a cut in interest rates in New Zealand was to flood into the kiwi dollar.

"There has been a big-time drift towards the commodity and a number of emerging market currencies," said Richard Benson, co-head of portfolio management at London-based currency fund Millennium Global.

"You just have to look at the price action on the kiwi yesterday to see that the central banks are now really under pressure but are also ready to fight this (currency strength)."

Friday's big set-piece is U.S. retail sales data, expected to show a 0.4 percent monthly increase in July, according to the median estimate in a Reuters poll. ECONUS

Benson noted that credit card use data had been poor, suggesting the risks might be to the downside - threatening both record high U.S. equity markets and the dollar.

With moves minimal in early European trade on Friday, the Aussie was down 0.3 percent at $0.7695. AUD=

The U.S. dollar, flat on the day, was down 0.3 percent on the week against the basket of currencies used to measure its broader strength .DXY , while grinding out a small gain against the yen. JPY= It was marginally lower on the day against the euro, against which it has fallen half a percent this week. EUR=

Britain's pound remains under pressure, but has so far held steady in the face of the UK government bond market's flirtation with negative yields this week.

The pound was roughly unchanged on the day at $1.2955 GBP= , having dipped back below $1.30 in expectation of more easing of the Bank of England's monetary policy in the months ahead. It traded 0.1 percent lower at 86.04 pence per euro. EURGBP=

"Markets continue to gorge themselves on easy money," said Societe Generale (PA:SOGN) strategist Kit Juckes.

"In all of this, the FX market is more a sideshow. A little stability in oil prices has allowed the Canadian dollar to out-perform the Aussie and the kiwi for a change, and the euro continues to trend lower against the crown."

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