Dollar firms on euro despite mixed economic signals

NEW YORK (AFP) - The dollar strengthened against the euro while the yen gained on Friday after mixed United States (US) economic reports, with consumer spending falling in April but consumer confidence on the rise.

The euro bought $1.2996 around 2100 GMT (5am Singapore time), down from $1.3043 at the same time Thursday.

The greenback fell to 100.37 yen from 100.74, while the euro fell more sharply, to 130.44 yen from 131.39.

The US government reported personal spending fell 0.2 per cent in April, the first decline since May 2012.

Data released later in the day, however, was more upbeat. The Chicago area PMI index surged to 58.7, its highest since March 2012, and the University of Michigan consumer confidence barometer rose to a better-than-expected 83.7, the highest reading since July 2007.

"The primary reason why investors loaded up on US dollars was because of their belief that the Fed will dial back asset purchases sooner rather than later," said Ms Kathy Lien of BK Asset Management.

Ms Lien said that next Friday's US jobs report will be a key factor in whether the Federal Reserve begins to taper its open-ended US$85 billion (S$107.4 billion) a month asset-purchase program aimed at supporting economic growth.

"If job growth continues to increase, then the dollar could become the beneficiary of safe-haven flows," she said.

The Fed has said it would keep the massive quantitative easing (QE) in place until high unemployment significantly improves.

Its ultra-loose monetary policy has fueled the stock markets' recent rally that smashed all-time records earlier in the month.

The euro was under pressure on Friday on news that euro zone unemployment hit a new record high, at 12.2 per cent April, up from 12.1 per cent in March, and retail sales fell in Germany, the region's leading economy.

"The economic situation in Europe remains negative and these numbers appear to confirm that it will remain that way for a while," said Mr Charles St-Arnaud, an economist at Nomura in New York.

The dollar rose to 0.9556 Swiss franc from 0.9534 franc late Thursday.

It also gained against the pound, which slid to $1.5199 from $1.5229.

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