NEW YORK: The US dollar firmed against the other major currencies on Tuesday after data showed US retail sales held up better than expected in April despite economic headwinds.

At 2100 GMT, the euro was quoted at 1.5473 dollars, down from 1.5542 late Monday in New York.

The dollar was meanwhile trading at 104.71 yen, up from 103.83 on Monday.

Market action came after a US Commerce Department report showed overall retail sales declined 0.2 percent in April, but "core" sales - stripping out the auto sector - rose a stronger-than-expected 0.5 percent.

Most economists had predicted that overall sales would drop 0.2 percent, while anticipating that core sales would rise 0.2 percent.

The jump in core sales in April was the strongest since January.

"The results hinted at a better sales trajectory this quarter, as well as some upward revision to the first quarter," said Peter Kretzmer, economist at Bank of America.

"With vehicle sales falling sharply in April and consumers reducing their gasoline purchases, other categories showed improvement."

Recent speculation that the worst of the credit crisis may now be over has driven the dollar higher against the euro over the past two weeks, with the Federal Reserve seen as prepared for a pause in its rate-cutting cycle.

But for the moment the European Central Bank's benchmark rate, 4.0 percent, remains substantially higher than that of the Federal Reserve, 2.0 percent, and some analysts have questioned whether the dollar can therefore sustain its recent appreciation against the euro.

Still, Ilya Spivak at Forex Capital Markets said the dollar rally may still have legs.

"Having given back some of its recent rally, the US dollar looks poised to regain momentum against the euro, Swiss franc and the yen," Spivak said.

Camilla Sutton at Scotia Capital said traders will be focusing on inflation data this week with consumer price index (CPI) reports on tap.

"With the US, UK and EU all releasing April's CPI results this week, it is no surprise we are seeing the market shift back to a focus on inflation (or even the dreaded stagflation)," she said in a note to clients.

"While other central banks are facing the increasingly real potential that inflationary pressures are escalating even as their economies slow, the Fed is in a surprisingly envious position as it has already dramatically reduced interest rates and can now complete its cycle. This should work in the dollar's favour in the near term."

In late New York trade, the dollar stood at 1.0528 Swiss francs after 1.0434 on Monday.

The pound dropped to 1.9451 dollars after 1.9576. - AFP/de