NEW YORK, Jan. 15 (Xinhua) -- The dollar weakened against major currencies earlier this week as latest U.S. economic data suggested a slow recovery, but it picked up on Friday amid deepening worries over the euro-zone economy.
The dollar has strengthened in December as encouraging economic reports have boosted expectations for a rate hike sooner than previously estimated by the U.S. Federal Reserve. The rising of the greenback eased recently as investors worried that the recovery of U.S. economy would be bumpy.
Economy is seeing broader improvements but the labor market remained weak, the Fed reported Wednesday in its latest current economic conditions report, commonly known as the Beige Book.
While economic activity remains at a low level, conditions have improved modestly further, and those improvements are broader geographically than in the last report, the Beige Book said.
However, labor market conditions remained generally weak with modest wage increases appearing in just a few districts of the 12 Fed regional districts, the report showed. Loan demand continued to decline or remained weak. A number of districts reported that credit quality continued to deteriorate. Nonresidential real estate conditions remained soft in nearly all areas.
U.S. trade deficit jumped 9.7 percent to 36.4 billion dollars in November, the Commerce Department reported on Tuesday. Exports rose 0.9 percent and imports rose 2.6 percent. Two-thirds of the increase in the deficit was due to a wider petroleum deficit as oil prices rose.
Exports will continue to benefit both from the recovery in world trade and from the extra competitiveness supplied by the weak dollar, analysts said. However, U.S. trade gap will probably widen further due to rising oil prices and higher imports driven by strong domestic demand.
Retail sales declined by 0.3 percent in December, according to the Commerce Department. Analysts have forecast an increase of 0.5percent. Core retail sales, excluding autos, gas and building materials fell by 0.3 percent after four months of solid gains. However, the gain of retail sales in November was revised up to 1.8 percent from 1.3 percent previously estimated. November core sales were revised up from 1.1 percent to 1.8 percent.
The report didn't suggest a fundamental change in the outlook for consumer spending and continues to expect moderate positive consumption growth, analysts said. It is expected that real consumer spending is still on track to expand by just under 2 percent in the fourth quarter of 2009.
Initial claims for jobless benefits rose to 444,000 in the weekending January 9 from 433,000 previously, the Labor Department reported. A separate report showed that U.S. import price index was unchanged month-to-month in December following a strong gain in November.
U.S. industrial output rose 0.6 percent in December, as utilities output jumped 5.9 percent on cold-weather demand for heating, according to the Fed. Capacity utilization for total industry edged up to 72.0 percent.
The Reuters/University of Michigan consumer sentiment index increased slightly to 72.8 percent in January from 72.5 percent a month earlier. The December consumer price index edged up by 0.1 percent, the Labor Department reported.
The European Central Bank (ECB) decided on Thursday to leave key interest rate unchanged at 1.0 percent. There was no material changed to monetary policy of the bank. The ECB believes that the Euro zone will grow at only a "moderate" pace in 2010, with the performance "uneven".
ECB President Jean-Claude Trichet reported that the decision to keep rates unchanged was unanimous. He reiterated that a strong U.S. currency is important. Trichet also said Greece won't win any special treatment from European officials, adding to worries over the country in serious fiscal problems.
Greece's public deficit is tipped to reach 12.7 percent of gross domestic product (GDP) in 2009, far above the EU's accepted ceiling of 3 percent. Some major rating agencies have already cut their ratings to Greece's sovereign debt.
Greece unveiled part of its three-year plan to slash its budget deficit on Thursday, pledging to cut budget gap to 2.8 percent of GDP in 2012. But pressures over the euro wouldn't ease in short term as financial markets remained skeptical, analysts said.
The euro bought 1.4358 dollars in late Friday New York trading, about 0.4 percent lower than a week ago. The British pound rose 1.4 percent to 1.6258 dollars. The dollar fell 0.1 percent during the past week to 1.0304 Canadian dollars, and rose 0.4 percent to 1.0277 Swiss francs. It fell 1.9 percent to 90.90 Japanese yen.
Special Report: Global Financial Crisis
