LONDON, Aug 11: The dollar got a lift on Friday from a sharp rebound in US retail sales which raised the possibility of US interest rates moving slightly higher.

The euro slipped to 1.2752 dollars in late European trading, from 1.2791 dollars late on Thursday. The dollar stood at 116.26 yen, from 115.27 yen.

“The robust retail sales report was the final blow in what has proved to be an ill-fated week for dollar bears, not the least of which was yesterday's (Thursday's) terrorist attempt in London,” said Michael Woolfolk at Bank of New York.

Earlier in the week, a run of 17 consecutive rate hikes in the United States came to a halt when the Federal Open Market Committee kept the benchmark rate unchanged at 5.25 per cent. The Federal Reserve said, however, that the outlook for rates would depend on upcoming data.

Friday's US retail sales report implied that consumer spending was holding up well.

Retail sales rose by 1.4 per cent in July, beating predictions of a 0.8 per cent increase and rebounding from a drop in June. The latest figure was also the highest since January.

The figure for June was revised, however, to show a steeper fall of 0.4 per cent compared with an initial estimate of 0.1 per cent.

“Today's data will be difficult to square with the more dire forecasts of a hard landing next year, as the US consumer remains dauntless in the face of mounting pressures to curb spending,” added Woolfolk.

He believed that expectations of rate cuts next year might be premature.

The market's attention then turned to US inflation numbers that are due next week.

“Another 0.3 per cent reading would bring inflation scares back into US markets,” said Hans Redeker, BNP Paribas' global head of forex strategy.

“The market will have to assume that the Fed might re-introduce its tightening in September,” he added.

The dollar had dropped to two-month lows against the euro after the Fed marked a pause in its two-year tightening cycle.

Elsewhere, the yen was slightly lower on indications of softer than expected economic growth in Japan. Official figures showed that Japanese growth slowed to a quarterly 0.2 per cent in the second quarter, down from 0.7 per cent recorded in the first quarter and expectations of 0.4 per cent.

The pound, meanwhile, drifted lower, having risen sharply after the Bank of England said this week that the annual rate of inflation might reach 3.0 per cent over the next six months.

The euro was changing hands at 1.2752 dollars against 1.2791 on Thursday, 148.13 yen (147.48), 0.6731 pounds (0.6755) and 1.5802 Swiss francs (1.5787).

The dollar stood at 116.26 yen (115.27) and 1.2393 Swiss francs (1.2339).—AFP