Dollar slips

The dollar slipped on Wednesday ahead of US retail sales figures that were expected to show more economic weakness, while repatriation flows linked to US Treasuries also put downward pressure on the US currency.
The yen inched up as Tokyo stocks trimmed early gains due to weaker Chinese equities, cooling demand for risky assets and prompting investors to unwind carry trades, in which they sell the low-yielding Japanese currency for assets in high yielders. Economists polled by Reuters estimate that retail sales slipped 0.2 percent in January after a 0.4 percent decline in December, but rose 0.2 percent with auto transactions excluded.
"A somewhat weaker number is already factored in," said Joseph Kraft, managing director of Japanese capital markets for Dresdner Kleinwort in Tokyo. "The question is how much weaker it's going to be," he said. Market participants say that a downside surprise in the figures may bolster the argument that the slowdown in US growth may yet continue, which would further fuel the belief that the Federal Reserve will cut rates next month to avoid a recession.
The dollar slipped 0.2 percent to 107.05 yen, also as some Japanese investors sold the US currency to repatriate funds linked to maturing US Treasuries and Treasuries-related coupons, which come up for payment later in the week. The US Treasury will make $26 billion in coupon payments on Friday, while $54 billion in Treasuries will mature on the same day.
Stock markets often influence currency swings, since investors see the equity market as a barometer of risk demand. A rise in equities shows stronger risk appetite, which can prompt investors to sell the yen in carry trades, while weaker shares can trigger short covering in the low-yielding currency. The euro traded 0.1 percent lower at $1.4570, not far from the day's low of $1.4560.
The single currency was pressured after a surprisingly strong reading of German business sentiment on Tuesday did little to alter speculation that the European Central Bank may cut interest rates from 4.0 percent in the next few months. The euro slipped 0.1 percent to 156.25 yen, having fallen to the day's low around 156.05 yen.
Dollar losses were limited after billionaire investor Warren Buffett said on Tuesday that he had offered to reinsure $800 billion of municipal debt guaranteed by bond insurers, easing some worries about further fallout from the credit crisis. The high-profile investor said he had extended the offer to MBIA, Ambac and FGIC Corp, but added that so far one of the three had rebuffed him.