Dollar keeps gains after data

The dollar steadied on Thursday after Bank of Japan will keep rates steady at a policy meeting next week. The dollar was supported after a 1.0 percent jump in US retail sales far exceeded expectations and was the strongest in four months, suggesting that consumers are holding up before the holiday shopping season even as the housing market suffers through a sharp slowdown.
Coming after healthy US job growth in November, investors have trimmed back some of their expectations for the Fed to cut rates to stem any further weakness in the economy.
"We should not be too pessimistic about the future course of the US economy, which is why the dollar bounced," said Kikuko Takeda, currency strategist at Bank of Tokyo-Mitsubishi UFJ. "There is a possibility the Fed does not cut rates next year but keeps a wait-and-see stance."
Many market players are still looking for the Fed to cut rates in 2007 and thereby undermine the dollar's yield advantage, even as other major central banks seem poised to keep ratcheting short-term rates even higher.
The euro was steady at $1.3215 holding below the 20-month high of $1.3370 struck earlier this month. The dollar was also unchanged at 117.50 yen but holding gains after rebounding from a four-month low of 114.43 yen touched last week. The euro was at 155.30 yen barely moving from levels late in New York and hovering near an all-time high of 155.50 struck on Wednesday.
Sterling touched an 8-year high against the yen around 231.30 yen. Currencies with higher yield advantages to the yen have gained as investors and speculators have been borrowing yen to buy higher-yielding currencies in the carry trade.
The Australian dollar traded near a nine-year high versus the yen, while the New Zealand dollar scaled its highest level since February. The yen remained under pressure before the BoJ's tankan quarterly survey of business sentiment due on Friday that precedes a policy meeting next week. Expectations have dissipated that the central bank will lift rates to 0.5 percent. Without citing any sources, the Nihon Keizai newspaper reported on Thursday that the BoJ is unlikely to raise rates this month so it can further assess the state of personal spending, inflation and the US economy.