NEW YORK, Oct 18: The dollar retreated on Friday in choppy, desultory trading as fairly solid economic data failed to meet the market’s lofty expectations set after a series of consensus-busting numbers in the past few sessions.

This left the US currency vulnerable to squaring of long positions when the dollar breached some crucial technical levels.

Analysts also said President George W. Bush’s meeting with Japanese Prime Minister Junichiro Koizumi on Friday yielded no blockbuster announcements that could have fueled a dollar rally.

In late afternoon U.S. trade, the euro was up 0.76 per cent against the dollar at $1.1680, rallying from a low of $1.1550. The euro’s gains supported it as well against the yen, rising to 127.66 yen.

The dollar slipped 0.45 per cent against the Japanese currency to 109.37 yen. Against the Swiss franc, the greenback weakened to 1.3278 francs. The pound, meanwhile, rose 0.27 per cent against the dollar to $1.6776.

The University of Michigan’s index of consumer sentiment came in higher than expected, but markets viewed the data as mildly disappointing, coming on the heels of surprisingly robust economic figures in the previous sessions. The index rose to 89.4 in October, outstripping economists’ forecasts of a rise to 88.0 and up from a final reading of 87.7 in September.

Traders said the data, while good, were not exceptional, allowing disappointment to ultimately taint trading decisions against the dollar.

The Michigan number was not disappointing relative to consensus, but with strong Philly Fed and Empire State surveys, above consensus is not good enough, said Steven Englander, chief FX strategist Americas at Barclays Capital in New York.

I didn’t expect much dollar buying with a Michigan number below 90, Englander added.

A stronger-than-expected US housing starts report for September earlier had helped push the dollar to a two-week high against the euro and to session peaks against the yen. But gains were not sustained, analysts said, as markets were unconvinced that the housing sector should lead the recovery in the United States.

The Commerce Department said the number of housing starts rose in September to a 1.888 million unit rate, compared with August’s 1.826 million rate. September’s number beat expectations for a 1.820 million rate.

Analysts also cited cited technical factors for the dollar’s decline. There’s a lot of position-squaring ahead of the weekend. I would say today’s price action could be partly due to technicals, said Bob Lynch, currency strategist at BNP Paribas in New York.

There’s been talk that a lot of the short-term traders have been long on the dollar and when there was no follow-through, sold the dollar (against the euro) on a break below $1.1570, Lynch said.

US government officials said Bush told Koizumi that markets should determine exchange rates. Bush is in Tokyo at the start of a six-day sweep through Asia. Before leaving for Asia, he promised to pressure Japan to hold back from intervening to curb yen strength.

Analysts said Bush’s meeting with Koizumi had few surprises. They say he had set the stage effectively in the days leading up to this Asia trip when he warned Japan and China to refrain from intervening to weaken their currencies against the dollar in support of their export markets. There’s still a lot of ambiguity in Bush’s Asia visit so far. And that has been dollar-negative, said Barclays’ Englander.—Reuters