NEW YORK, July 19: The dollar was mostly lower on Friday, retreating from strong gains earlier in the week while the euro bounced off recent lows.

The single European currency rose to $1.1269 against $1.1203 late on Thursday in New York, but still a far from an all-time high point of $1.1933 reached in late May.

The dollar eased to 118.40 yen from 118.78 on Thursday.

Traders said the environment appears to favor the dollar, but that the greenback is digesting some recent gains.

The dollar retains upside potential during at least the remainder of 2003 as US business cycle conditions continue to outperform those of other G7 countries, said Robert Sinche at Citibank.

Although the earnings season has checked the equity market rally for now, alleviating some of the pressure on fixed income markets, in general the macro backdrop continues to evolve in a dollar positive fashion, said Steve Pearson, economist at British bank HBOS.

Prospects of a US economic recovery appeared to brighten after a closely watched index from the Philadelphia Federal Reserve Bank showed Thursday a sharp improvement in activity in the US manufacturing sector in the Philadelphia region.

But Commerzbank strategist Nick Parsons said it was too soon to declare an end to the dollar’s downturn.

The question everyone is asking is whether this is the end of the 18-month bear market for the dollar, he said.

We believe it is too soon to call the turn, even though we have argued since the beginning of the year that the dollar would be stronger in both 2004 and 2005, he wrote in a note to clients.

The dollar was being quoted in late trade at 1.3618 Swiss francs from 1.3698 Thursday.

The pound eased to $1.5901 from 1.5960 Thursday. —AFP