Market info

Dollar gains on euro

16 Jan  - Fundamental 

The dollar rose against high-yielding currencies Friday as investors digested weaker-than-expected economic reports and looked for safer investments.

What prices are doing: The dollar was up 0.8% versus the euro to $1.4389 and rose 0.4% against the UK pound to $1.6265. But it fell 0.5% versus the Japanese yen to ¥90.70.

What's moving the markets: The Consumer Price Index, a key measure of inflation, rose 2.7% for 2009, and a modest 0.1% in December, below the 0.2% increase economists expected.

Analysts said investors continued to react to the 0.3% surprise fall of retail sales in December, which was released by the Commerce Department Thursday. Economists surveyed by Briefing.com had anticipated that December sales would grow 0.5%.

Stocks fell sharply Friday, despite better-than-expected earnings reports from JP Morgan Chase (JPM, Fortune 500) and Intel (INTC, Fortune 500).

What analysts are saying: «The rally of the buck is more of a reflection of weakness than strength,» said Kathy Lien, director of currency research at Global Forex Trading. «The overall optimism that has built up over the last couple of weeks is being tempered by the economic reports that are leading to the risk aversion we're seeing in the markets.»

But she said investors' bid for safe haven investments may not last leading up to the the Federal Reserve first two-day meeting of the year scheduled for the last week in January.

She said investors could start selling the dollar on speculation that the central bank may raise interest rates sooner than expected.

© CNNMoney.com