NEW YORK, Dec. 11 (Xinhua) -- The dollar rose against major currencies at the end of the week after a couple of strong U.S. economic reports lifted expectations of interest rate hikes from the Federal Reserve.
The Reuters/University of Michigan consumer sentiment index jumped by 6 points in the first half of December to 73.4, its highest level since September. Sub-indexes of consumer sentiment about current economic conditions and economic outlook both rose significantly.
"This is a very timely improvement arriving precisely at the busiest and most critical period of the retail sales season," said analysts of Global Insight.
U.S. retail sales rose by 1.3 percent month-to-month in November, significantly more than an expected increase of 0.6 percent, the Commerce Department reported. Core retail sales -- sales excluding autos, gas and building materials -- rose by a healthy 0.5 percent. The report suggests this year's holiday shopping season has gotten off to a reasonably healthy start, according to analysts of Nomura Economic Research.
It was one of the few times in months that positive economic reports drove the dollar higher. In the past year, foreign exchange investors took the dollar as a safety haven currency. The greenback tends to fall on positive economic news, and to rise when investors worry about economic outlook.
The dollar jumped higher last Friday after the November non-farm employment report turned out to be much stronger than expected. But it's too early to say whether the correlation between weak dollar and good news is fading.
Although odds of the U.S. Federal Reserve increasing interest rates before the third quarter of 2010 are low, the central bank may begin to tighten monetary policy before that by gradually exiting economic stimulus actions.
Investors are waiting the Fed monetary policy meeting due next week for any new signals about exit strategy. The Fed widely expected to keep key rates unchanged at near zero level at the meeting.
It was also expected that the "extended period" language about low interest rates will remain in the Fed's statement after the meeting. However, strong economic reports released recently have sparked speculations that the Fed may hold a more positive tone about economic conditions in the statement.
Fed Chairman Ben Bernanke said Monday the U.S. economy's recovery remained fragile and unemployment may be high for some time.
"We will continue to see modest economic growth next year -- sufficient to bring down the unemployment rate, but at a pace slower than we would like," Bernanke told the Economic Club of Washington D.C.
The central banker promised to keep inflation low and the Fed "will be able to do so. "In the near term, elevated unemployment and stable inflation expectations should keep inflation subdued, and indeed, inflation could move lower from here," he said,
"We are still looking at an extended period" before the Fed began raising rates, he added. The dollar retreated on Monday as Bernanke's comments trimmed expectations for raising interest rates.
The dollar picked up on Tuesday after credit ratings of Greece and some Dubai companies were downgraded. It fluctuated within small ranges later before rising amid strong data on Friday.
The euro bought 1.4671 dollars in late Friday New York trading, about 1.1 percent lower than a week ago. The British pound fell 1.1 percent to 1.6241 dollars. The dollar rose 0.2 percent during the past week to 1.0606 Canadian dollars, and rose 1.5 percent to 1.0341 Swiss francs. It fell 1.7 percent to 89.18 Japanese yen.
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