Dollar dips as U.S. retail sales misses expectations

By Karen Brettell

NEW YORK (Reuters) - The U.S. dollar dipped on Monday after retail sales data for September missed economists’ expectations, and as benchmark U.S. Treasury yields consolidated after hitting seven-year highs last week.

U.S. retail sales barely rose in September as a rebound in motor vehicle purchases was offset by the biggest drop in spending at restaurants and bars in nearly two years.

Retail sales edged up only 0.1 percent in the month. Economists polled by Reuters had forecast an increase of 0.6 percent.

“We had softer than expected retail sales, that was another leg of dollar selling,” said Win Thin, global head of currency strategy at Brown Brothers Harriman in New York.

It comes after data last week showed that U.S. consumer prices rose less than expected in September, held back by a slower increase in the cost of rent and falling energy prices, as underlying inflation pressures appeared to cool.

Higher 10-year Treasury yields, which on Tuesday shot to 3.26 percent, helped to boost the greenback last week. With yields now having retraced to 3.15 percent, investors are looking for fresh impetus for dollar buying.

“Until we get another leg up in U.S. yields, the dollar’s going to be sort of in limbo,” said Thin.

Safe haven currencies the Japanese yen and the Swiss franc gained on Monday as stocks weakened, with rising tensions between Western powers and Saudi Arabia adding to a cocktail of concerns that battered global stocks last week.

Saudi Arabia has been under pressure since prominent Saudi journalist Jamal Khashoggi, a critic of Riyadh and a U.S. resident, disappeared on Oct. 2 after visiting the Saudi consulate in Istanbul.

Chancellor Angela Merkel's Bavarian sister party said on Monday it would back political stability in Berlin after suffering big losses in a regional election that their far-right foes hailed as "an earthquake" that would rock the coalition government.

"I don't think (the German election result is) a huge political risk, but it does tell you that political risks in Europe are not going away," said Alvin Tan, a currencies analyst at Societe Generale in London.

Sterling traded at one-week lows on Monday amid a stalemate over the post-Brexit status of Britain's land border with Ireland, puncturing optimism before an EU summit on Wednesday.

(Additional reporting by Tommy Wilkes in London; Editing by Susan Thomas)

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