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NEW YORK: The dollar fell slightly against the euro for the second straight day Thursday in quiet trading as traders awaited the release of key US retail data that could drive markets.
The euro traded at US$1.3678 in New York around 2200 GMT, up from US$1.3657 late Wednesday.
The dollar, meanwhile, was mostly flat against the Japanese currency, at 90.48 yen from 90.49 a day earlier.
The volatility in dollar-euro trading had eased in recent weeks after the Greek debt crisis sent the single European currency into a tailspin, but analysts say US retail data for February to be released Friday could provide the catalyst for trading.
"The US dollar is likely to face increased volatility over the next 24 hours of trading, as economists forecast retail spending in the world's largest economy to contract 0.2 per cent in February," said David Song, currency analyst at Forex Capital Markets.
"And the ongoing weakness in the private sector could lead the Federal Reserve to maintain a dovish policy stance over the coming months, as the central bank aims to encourage a sustainable recovery," he said.
The Fed's policy making arm meets on Tuesday and many analysts expect the benchmark Fed funds interest rate to remain at the zero to 0.25 per cent range.
"A stronger retail sales report would add to the upside momentum in the dollar," said Kathy Lien, director of currency research at Global Forex Trading.
"This contraction in volatility has been occurring in the euro-dollar for the past few weeks and signals that a breakout is imminent - tomorrow's US retail sales report will provide the perfect catalyst," she said.
"The US labor market is doing better than most people expected and now, traders will look for further confirmation of the US recovery in the consumer spending report," Lien said.
The dollar came under slight pressure early Thursday after the government reported that the US trade deficit shrank, with both exports and imports dropping in January.
The euro rose to a high of US$1.3687 from an overnight low of US$1.3621, before giving back most of the gains.
"A better than expected US trade report initially prompted some concern because of the nominal decline in exports during January, but later gave way to more favorable sentiment," said Michael Woolfolk of Bank of New York Mellon.
The Commerce Department said the US trade deficit shrank to a seasonally adjusted US$37.3 billion, from a downwardly revised US$39.9 billion in December.
The figures surprised most analysts who had expected the trade shortfall would increase to US$41.0 billion.
In other trades Thursday, the dollar dipped to 1.0682 Swiss francs from 1.0696 a day earlier.
The British pound rose to US$1.5058 from US$1.4976.
- AFP/sc
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