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FX round-up: Retail sales lifts sterling

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Date: Saturday 22 Mar 2008

LONDON (ShareCast) - The dollar continued its resurgence on Thursday though it closed off the day’s highs.

Sentiment was boosted by the Philadelphia Fed manufacturing index for March which, though it showed factory activity continuing to decline, returned a better reading than anticipated. The index dipped to -17.4 in March from February’s –24, while economists had been expecting a March figure of –18.

Traders said that the closing of short positions ahead of the long Easter week-end had more to do with the dollar’s rise than any reassessment of the underlying strength of the strength of the US economy. First time jobless claim figures seemed to back this up, as they rose 22,000 to 378.000 in the week to 15 March.

The value of the euro declined to $1.5430 in New York, down from Wednesday’s closing value of $1.5617, while sterling ended the day buying only $1.9846, having been worth more than two dollars earlier in the week. The greenback even briefly rose above 100 Japanese yen before falling back to 99.30, versus 99.09 yen on Wednesday.

Earlier in the day in London trading sterling had received a lift from retail sales data which suggested the gloomy financial headlines have yet to have a real impact on shoppers' habits with volumes unexpectedly rising in February.

According to the Office of National Statistics, total sales volume increased by 1.0% between January and February. Sales volume for predominantly food stores increased by 1.6%, the largest increase for this sector since June 2006 (1.9%). Sales volume for predominantly non-food stores increased by 0.5%.

Though it failed to hold its own against the dollar, sterling made headway in London against the euro, which fell in value by 1.2% to 77.84p – its biggest single-day dip in almost four years.

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