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Euro Weakens From 13-Month High as German Retail Sales Slide

Jan. 31 (Bloomberg) -- The euro weakened from a 13-month high against the dollar after a German report showed retail sales fell more last month than economists forecast, damping demand for the 17-nation currency.

The euro dropped for the first time in three days versus the yen as the data fueled speculation the currency’s recent gains would undermine any economic recovery in the region. The Dollar Index headed for a second monthly loss before a U.S. report that economists said will show jobless claims increased, validating the Federal Reserve’s decision to maintain asset purchases. South Korea’s won fell for a second day.

“No one really believes it’s a massive, sustainable recovery” in Europe, said Shant Movsesian, a foreign-exchange strategist at 4Cast Ltd. in London. “We’ll get a lot of ups and downs” and the euro will probably stay around current levels for the rest of the quarter, he said.

The euro declined 0.1 percent to $1.3557 as of 7:31 a.m. New York time after rising to $1.3587 yesterday, the highest since November 2011. The common currency fell 0.2 percent to 123.36 yen after appreciating to 123.86 yesterday, the strongest since May 2010. The dollar was little changed at 90.99 yen.

German retail sales adjusted for inflation and seasonal swings dropped 1.7 percent from November, when they rose 0.6 percent, the Federal Statistics Office said. A separate report showed the jobless rate unexpectedly declined in January.

Today’s advance pared the euro’s 2.9 percent gain this year, which has made it the best performer of 10 developed- market currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen weakened 5.4 percent and the dollar declined 0.2 percent.

Dollar Index

The Dollar Index headed for its biggest monthly drop since September after the Fed said yesterday it will keep buying Treasuries and mortgage bonds to cap borrowing costs.

The Fed repeated that its purchases, divided between $40 billion a month of mortgage-backed securities and $45 billion a month of Treasury securities, will continue “if the outlook for the labor market does not improve substantially.”

U.S jobless claims rose by 21,000 to 351,000 last week, according to a Bloomberg News survey before the Labor Department report today. Economists predict separate data today will show personal spending increased in December.

The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six U.S. trading partners, has dropped 0.6 percent this month to 79.289. It was little changed today.

Won Falls

The won depreciated for a second day versus the dollar after South Korea’s Deputy Finance Minister Choi Jong Ku proposed taxes on currency trading and bonds to limit “speculative” capital inflows.

The won dropped 0.3 percent to 1,088.59 per dollar at the close of trading in Seoul. The currency has weakened 2.2 percent this month.

New Zealand’s dollar strengthened versus the greenback after Reserve Bank Governor Graeme Wheeler said policy makers expect economic growth to strengthen this year.

“House price inflation has increased and we are watching this and household credit growth closely,” Wheeler said in a statement in Wellington after keeping the official cash rate at 2.5 percent.

The so-called kiwi appreciated 0.2 percent to 83.72 U.S. cents after declining to 82.80 cents on Jan. 28, the weakest level since Jan. 4.

The central bank’s statement “was neutral to slightly hawkish in tone,” Sean Callow, a senior currency strategist in Sydney at Westpac Banking Corp., wrote in a research note today. The currency may climb toward 84 U.S. cents, he wrote.

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