Dollar, yen hold near week's highs vs euro, Aussie, kiwi * Dollar briefly hits 2-month low vs yen By Kaori Kaneko TOKYO, May 14 (Reuters) - The yen and dollar held near some of their strongest levels this week on Thursday after bleak U.S. retail sales data rekindled worries about the economy, prompting investors to reduce bets on riskier assets.
Wednesday's data showed sales at U.S. retailers fell for a second straight month in April, denting hopes the economy would soon pull out of recession.
Tokyo's Nikkei share average .N225 fell 2.6 percent after Wall Street tumbled following the sales data. "Hopes for the U.S. economy's recovery from the recession have dominated the market.
But when U.S. stocks fell after the economic data dampened such a view, currency market sentiment turned pessimistic about the real economy," said Minoru Shioiri, chief manager at Mitsubishi UFJ Securities.
"The currency market is largely driven by investor sentiment, which has been swayed by recent mixed economic data and news," he said. But if more data gave positive signals, market sentiment was likely to reverse, Shioiri said. The euro fell to its lowest this week at $1.3525 on trading platform EBS as traders dumped aggressive short-dollar positions accumulated earlier in the week. It then pared its losses to stand 0.2 percent lower at $1.3573. The single currency had hit a seven-week high of $1.3722 on Wednesday.
The slide on Wall Street and a fall in Asian stocks also prompted investors to liquidate long positions in euro/yen and other yen crosses, although cross/yen pairs later trimmed their losses. Against the yen, the euro hit its lowest in two weeks at 128.87 yen but later in the day it was up 0.1 percent on the day at 129.69 yen . The liquidation of long cross/yen positions sent the dollar down at one point to 95.14 yen , matching an eight-week low first hit the previous day.
It later pushed back to 95.53 yen, up 0.2 percent for the day. The dollar was supported against the yen due to buying related to an options barrier at 95.00 yen, traders said. Masashi Hashimoto, senior analyst at Bank of Tokyo- Mitsubishi UFJ, wrote in a research note that if the dollar breaches support near 95.00 yen -- the bottom of the cloud on daily Ichimoku charts -- it may then drop towards 94.27 yen, a 50 percent retracement of the rise from its January low of 87.10 yen to its April peak of 101.45 yen.
By Reuters
