Dollar rises on global weakness
European economic concerns send dollar higher against euro, pound. Greenback also rises against the yen despite U.S. weakness.
NEW YORK (CNNMoney.com) -- The dollar continued to rebound against the euro and British pound Wednesday, as European economic woes overshadowed weak U.S. retail sales and surging oil prices.
The 15-nation euro slid very slightly to $1.492 in New York Wednesday. The euro fell below $1.50 on Friday for the first time since February, and has fallen more than 11 cents from its high of $1.6038 set on July 15.
Last week, the European Central Bank decided to hold a key interest rate steady to support economic growth, instead of raising it to combat inflation. Rate hikes usually translate into lower inflation and increased currency value, while cuts tend to have the opposite effect.
"The United States is now expected to raise its interest rates much sooner than in Europe," said Shankar Das, a currency strategist with Forex Capital Markets. "Investors are pricing in those expectations to the dollar and euro."
Furthermore, Das said the ongoing conflict between Georgia and Russia has unnerved traders who invest in the European currency.
"Investors still aren't comfortable with the Georgian war with Russia," said Das. "They're taking their money out of Europe and putting it into the United States where they feel it's safe."
The pound sank even further - 1.5% - to $1.8692 from $1.8997 on Tuesday, sending the British currency to its lowest point against the dollar since October 2006.
The news comes after the United Kingdom said unemployment is on the rise and inflation will continue to soar to 5%. As a result, the government hinted that interest rates may have to be lowered to prevent the country from entering a recession.
"This just means that the pound has become very weak - the dollar is not necessarily that strong," said Das.
Retail sales dropped slightly in July, meeting economists' expectations that spending would decline following the end of government stimulus payments.
Consumers spent 0.1% less in stores last month, matching consensus estimates from economists surveyed by Briefing.com but falling short of the 0.3% rise in June. Sales excluding autos rose 0.4%, slightly below the 0.5% economists' consensus, and down from an upwardly revised 0.9% gain in June.
Still, the dollar gained ground against the Japanese yen, rising to ¥109.58 from ¥109.40 late Tuesday. 
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