LONDON, Jan 13: The dollar fell against the euro at the end of the European trading week on Friday, after disappointing US retail sales and wholesale prices and expectations that the US Federal Reserve would shortly cease interest rate hikes.

The euro rose to $1.2104 in late European trading from $1.2033 in New York late on Thursday.

The dollar edged up to 114.47 yen from 114.32 on Thursday.

The euro had fallen sharply on Thursday on news of a lower-than-expected US trade deficit for November and the absence of any strong hint of a further rate hike from the European Central Bank (ECB).

But it rebounded on Friday ahead of the US retails sales data and producer price index (PPI) for December 2005.

Seasonally adjusted US retail sales rose 0.7 per cent last month, compared to November, and just 0.2 per cent excluding the automobile sector. Analysts had expected rises of 0.9 per cent and 0.4 per cent respectively.

A surge in energy cost pushed US producer prices — an indicator of inflation at the wholesale level — up 0.9 per cent in December, the steepest rise since September 2005.

But the core PPI index, excluding food and energy, rose only 0.1 per cent. Economists had expected a 0.4 per cent rise in the headline PPI and a 0.2 per cent increase in the core rate.

Paul Ashworth at Capital Economics noted that the headline rise in retail sales had been driven by volatile vehicle sales, while the headline PPI increase was mostly the result of rising petrol and food prices.

“The upshot is that there is nothing here to stop the Fed calling it a day once interest rates reach 4.5 per cent,” he said.

Analyst Daragh Maher at CALYON agreed. Although the figures will not alter expectations of the Federal Reserve hiking interest rates by another quarter point to 4.5 per cent at the end of January, future data will need to be stronger to justify hikes beyond that, he said.—AFP