Dollar rally stalls, euro climbs from fresh 12-year low

Thu Mar 12, 2015 4:31pm EDT
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By Daniel Bases

NEW YORK (Reuters) - The dollar fell against the euro on Thursday as investors took profits after a powerful rally brought the greenback to a 12-year high in early trade, then surprisingly weak U.S. February retail sales stoked the sell-off.

The euro remained down 12 percent year-to-date, careening toward parity with the dollar as monetary policies ease in Europe and elsewhere at a time of stronger U.S. economic growth and expectations the Federal Reserve will start raising interest rates this year.

The dollar weakened after the U.S. Commerce Department reported a surprising 0.6 percent drop in retail sales in February as harsh winter weather dented sales that were expected to rise 0.3 percent.

"I think we're finally seeing some early signs of fatigue in the dollar's rally," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington, D.C.

"Caution is on the rise ahead of next week's Fed meeting. On the one hand, steady job growth has many expecting the Fed to lay the ground work for an eventual rate hike. But this rapid rise in the dollar could warrant a warning from the Fed as a potential threat to growth," he said.

The euro rose 0.71 percent to $1.06220 on the EBS trading platform EUR=EBS, recovering from a session low of $1.0494, its weakest since January 2003.

The European Central Bank launched a 1.1 trillion euro bond-buying program this week, denting the euro's appeal by driving yields of many euro zone bonds to all-time lows.

A 10-year German bond DE10YT=RR yields 0.25 percent versus 2.10 percent on a benchmark 10-year U.S. Treasury US10YT=RR.   Continued...

A picture illustration shows Euro banknotes in front of a stocks graph in Sarajevo March 9, 2015. REUTERS/Dado Ruvic