NEW YORK: The dollar was slightly higher against the yen on Thursday following data showing US retail sales unexpectedly rebounded in August, while the Swiss franc hit its strongest against the euro since 2015.
The dollar pared some gains following the data, which showed retail sales increased 0.3 percent last month, but demand for goods is cooling as the U.S. Federal Reserve raises interest rates. Economists polled by Reuters had forecast sales would be unchanged
U.S. retail sales unexpectedly rebounded in August as Americans ramped up purchases of motor vehicles and dined out more amid lower gasoline prices, but demand for goods is cooling as the Federal Reserve aggressively raises interest rates. Consumer spending, however, is likely to remain supported by persistent strength in the labor market, with other data on Thursday showing the number of people filing new claims for unemployment benefits last week fell to the lowest level in more than three months.
Labor market resilience together with a surprise increase in consumer prices in August is likely to give the U.S. central bank ammunition to deliver a third consecutive 75-basis-point interest rate hike next Wednesday.
The dollar has been supported by the view that the Fed will keep tightening policy aggressively.
Recent data including this week's surprise increase in consumer prices in August is likely to give the U.S. central bank enough reason to announce a third consecutive 75-basis-point rate hike next Wednesday.
"The details of the retail sales report weren't nearly as strong as the headline. If you break down the retail sales report, it was generally a bit softer," said Adam Button, ForexLive chief currency analyst.
With the dollar, "the default mode in the currency market is to buy the dollar unless there's a good reason to sell it," he said.
The dollar was up 0.2 percent against the yen at 143.39, having fallen 1 percent on Wednesday on news that the Bank of Japan had checked on exchange rates with banks - a possible preparation for yen buying.
The Bank of Japan conducted a rate check with banks in apparent preparation to step in to tame sharp yen falls, providing what analysts said would only be a brief respite for the currency, given the low chance of actual yen-buying intervention.
The dollar index was nearly flat at 109.64.
Investors continued to debate whether Japanese authorities really would intervene to support their currency, which has fallen nearly 20 percent this year.
A record Japanese trade deficit for August has also underscored the bearish trend for the yen.
Japan ran its biggest single-month trade deficit on record in August as imports surged on high energy costs and a slump in the yen, exposing the economy's vulnerability to external price pressures.
The growing trade deficit highlights the fragile nature of Japan's economic recovery which has so far largely remained intact despite a high price tag firms are paying for imports that is aggravated by the yen's slide to a 24-year low and rising prospects of a global slowdown.
Imports jumped 49.9% in the year to August, driven by costs of crude oil, coal and liquefied natural gas (LNG), and causing the trade deficit to swell to 2.8173 trillion yen ($19.71 billion), the biggest shortfall on record.
August's trade gap marked the 13th consecutive month of year-on-year shortfalls and was bigger than the 2.3982 trillion yen deficit expected in a Reuters poll
Japanese currency officials "stepped up their rhetoric this week, and the market is really still calling their bluff. It's very tough to talk a currency down when the fundamentals are so divergent," Button said.
The franc rose against the euro, and hit its strongest level against the single currency since January 2015, when the Swiss National Bank scrapped its minimum exchange rate of 1.20 francs per euro.
Meanwhile, the dollar was down 0.2 percent against the Swiss franc. The SNB also meets next week and there is some speculation in the market that it could join the Fed and ECB with outsized rate increases. Money markets are fully pricing in a 75 basis-point rate rise from the SNB, according to data from Refinitiv.
The euro was up 0.2 percent at $0.9997. It hit a 20-year low of $0.9864 last week.
In crypto markets, Vitalik Buterin, Ethereum inventor and co-founder, wrote on Twitter that a major software upgrade to the Ethereum blockchain aimed at slashing its energy usage has been completed. The token, which underpins the ethereum network, was last down 9.3 percent. Bitcoin was down 2.3 percent.
