LONDON, April 14 - The dollar held onto some of its recent gains on Monday after last week's surprisingly strong U.S. retail and consumer data, but doubts remained about the future health of the post-war U.S. economy. The weekend meeting of Group of Seven (G7) financial leaders in Washington, which focused on the reconstruction of war-torn Iraq, caused barely a ripple in the market. In its reference to currencies, the G7 communique only repeated the group's mantra that it would "continue to monitor exchange markets closely and cooperate as appropriate". Analysts say the approach of the Easter weekend in Europe and the absence of key U.S. data this week meant trading was likely to remain thin.
"There are some fears that the post-war U.S. economy still finds it hard to go back into full gear. So even with Friday's data there is suspicion. But this week trading will remain in a tight range," said Shahab Jalinoos, currency strategist at UBS Warburg. By 0735 GMT the dollar stood at $1.0731 per euro , having risen to $1.689 on Friday after the data. Key U.S. corporate earnings due on Monday include first quarter results from Citigroup , IBM and Unisys .
LESS INSPIRING
On Friday, the University of Michigan's preliminary April index of consumer sentiment jumped to 83.2 from 77.6 in March, beating economists' expectations for a more modest rise to 78.1. The U.S. Commerce Department also said retail sales rose 2.1 percent in March, well above Wall Street's expectations and the biggest monthly gain since October 2001. But U.S. stocks failed to maintain gains made on the data, with the main three key indices ending down. In early Europe U.S. stock futures pointed to a steady to slightly firmer open on Wall Street. "It may be early to be too optimistic about the outlook for the dollar because its recovery against European currencies is limited and the reaction in the U.S. share market to economic figures is limited," said Koichi Abe, manager at Aozora Bank's currency trading section.
NIKKEI AND YEN
The yen stood at 120.62 to the dollar compared with 120.52 in late New York on Friday, in the middle of the recent range. In Japan, stocks fell to fresh 20-year lows on worries over a sluggish global economy and the threat of pension fund sales. Japanese institutional and retail investors were eager to shift funds into foreign bonds in order to gain higher returns as domestic interest rates hit record low levels. Finance Ministry data on Thursday showed that Japanese investors made their biggest purchases of foreign bonds in three months in March. Bucking the usual seasonal repatriation of foreign assets ahead of the March fiscal year-end, Japanese bought a net 1.6479 trillion yen ($14 billion) of foreign bonds, the biggest total since December when they purchased 1.8907 trillion yen.
They bought a net 1.1654 trillion yen of foreign bonds in February. "It's hard to say whether the fall in Nikkei always means pressure for the yen because some investors might repatriate capital to cover losses," Jalinoos said. "But what is clear is that the weak stock market raises pressure on the government to intervene if the yen appreciates, and the risk of the yen going higher than it is becomes smaller."//