NEW YORK: The dollar gained on Thursday, buoyed by a surge in US retail sales in May that could push Federal Reserve policymakers toward raising US interest rates as early as September.
The dollar, which had traded weakly over the previous three days, was up as much as 1.1 percent against the yen after posting on Wednesday its biggest single-day drop in six months versus the Japanese currency.
American consumers last month increased spending by 1.2 percent after an upwardly revised 0.2 percent gain in April, the Commerce Department said.
April sales were previously reported unchanged.
Forecasters polled by Reuters had predicted a 1.1 percent increase in retail sales, following an unexpectedly robust jobs report last week that bolstered confidence in the US economic outlook and prospects for higher interest rates.
"The market, which had been expecting something after September, now may be slipping more towards lift-off in September," said Thierry Albert Wizman, global interest rates and currencies strategist at Macquarie Limited in New York.
Other data on Thursday showed a slight increase in new applications for unemployment benefits, but remained in territory associated with a tightening labor market.
The dollar has been rising for nearly a year but lost 1.3 percent against the yen on Wednesday as investors unwound short yen positions following a comment by Bank of Japan Haruhiko Kuroda that the yen was already "very weak".
Japanese government and central bank officials said Kuroda's remark was not part of a concerted effort by Tokyo to check the currency's declines.
The dollar last traded at 123.41 yen, up 0.6 percent on the day, and it was ahead 0.60 percent against the euro to $1.1260. The dollar index was up 0.4 percent.
The dollar was also helped by a selloff in the New Zealand dollar, which slumped 3 percent to a five-year low against the greenback after the Reserve Bank of New Zealand cut rates and suggested more easing may follow.
The kiwi was last off 2.8 percent at $0.7002 in New York trade.
Trading volumes were light, according to David Bradley, director of currencies trading at Scotia Bank in Toronto.
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