Dollar Rises to One-Week High Vs Euro

The dollar rose to a one-week high against the euro as U.S. retail sales advanced in May more than economists forecast, raising speculation the Federal Reserve will increase borrowing costs this year.

The U.S. currency appreciated 2.4 percent versus the euro this week as Fed Chairman Ben S. Bernanke said the risk of a deeper economic slowdown is receding. An index gauging the dollar against the currencies of six U.S. trading partners rose to the highest level in more than a month.

The dollar increased 0.9 percent to $1.5408 per euro at 9:17 a.m. in New York, from $1.5552 yesterday. It touched $1.5380, the highest level since June 5. The U.S. currency rose 0.9 percent to 107.94 yen, from 106.96. The euro was little changed at 166.31 yen, compared with 166.33 yen.

U.S. retail sales increased 1 percent in May, following a revised 0.4 percent advance the prior month, the Commerce Department reported. The median forecast of 82 economists surveyed by Bloomberg News was for a 0.5 percent increase.

Traders bet Fed policy makers are more likely to raise interest rates in August. Fed funds futures on the Chicago Board of Trade show a 60 percent probability the central bank will raise borrowing costs by at least a quarter-percentage point, compared with a 7 percent chance a week ago.

The Fed has lowered its benchmark rate to 2 percent from 5.25 percent since September to prevent widening subprime losses from stalling economic growth. The European Central Bank has kept its main refinancing rate at a six-year high of 4 percent since last June.

Dollar Rises to One-Week High Vs Euro, Bloomberg
6/12/2008 6:40:32 AM