NEW YORK, Sept 13: The dollar stumbled on Friday on an unexpected fall in US retail sales in anxious trading reflecting market uncertainty surrounding the fate of ailing US investment giant Lehman Brothers.

The euro jumped to $1.4229 up sharply from 1.3969 late Thursday in New York.

But the dollar managed to rise to 107.92 yen against 107.05 on Thursday after data showing the Japanese economy faltered badly in the three months to June.

Japan’s economy posted its sharpest contraction in nearly seven years last quarter, shrinking at an annualized 3.0 per cent in the three months through June, worse than the 2.4 percent previously thought,

Against the euro, the dollar was weighed down by news that US retail sales fell 0.3 per cent in August from July as a government fiscal stimulus faded.

The figure, released by the Commerce Department, surprised analysts who had expected a gain in sales of 0.3 percent.

Retail sales figures for this month (August) are quite disappointing and show that there is no support to consumer spending in the third quarter as the fiscal stimulus fades, said Amine Tazi, analyst at Natixis. We don’t expect any recovery in the coming months -- consumption is likely to be negative, Tazi said.

Citigroup analysts said weakness in the retail sales report reveals further underlying deterioration in the US economy. Analysts said investors remained unsettled by prospects for embattled Lehman Brothers, whose share meltdown continued Friday and as the US government scrambled to find a buyer.

Shares in Lehman fell 13.5 per cent on the heels of a near 42 per cent slide Thursday.

Speculation swirled over a deal to save the venerable Wall Street firm amid ongoing debate on whether the US government should “backstop” any arrangement with credit guarantees, a decision widely criticised in the takeover of Bear Stearns.—AFP