Euro maintains slight lead on dollar after US data

Investors showed caution ahead of Tuesday's meeting in Washington of Federal Reserve policymakers, who were seen as unlikely to change their economic stimulus policies and record-low lending rates.

The single European currency in late-day trade was at $1.3390 against $1.3386 on Monday. The euro at one point had risen to $1.3499, its best reading since November 23.

The dollar was meanwhile at 83.54 yen, up from 84.44 on Monday.

The greenback made up lost ground after the US Commerce Department reported a 0.8 per cent gain in retail sales in November from October.

It was the fifth straight monthly rise and beat market expectations for a gain limited to 0.5 per cent, reviving investor confidence in the US recovery.

"Overall, the November retail sales report was a strong report that flew in the face of the weak wage growth reported in the November employment report," said Patrick O'Hare at Briefing.com.

Despite high unemployment that has nearly one in 10 workers without a job, shoppers swarmed into stores and online fueling the consumer spending that makes up two-thirds of activity in the world's largest economy.

But the dollar nonetheless remained under pressure as Moody's ratings agency warned that US tax-break proposals could damage the outlook and finances for the American economy and put the country's top level credit rating at risk.

Under the circumstances, traders were paying close attention to the meeting later Tuesday of the Federal Reserve's Open Market Committee, which in early November approved an initiative to buy Treasury securities and other assets worth $600 billion as a means of galvanising overall momentum.

Analysts have said the Fed is unlikely to announce major policy changes.

"It is too early for the Fed to make significant changes to their outlook," said Rob Carnell of ING bank.

"A gentle acknowledgement that the economy is looking better is about all we can hope for."

European bond prices were lower Tuesday as investors opted for riskier equities following release of the upbeat US retail sales data.

The yield on the 10-year German Bund rose to 3.023 per cent from 2.972 per cent on Monday while the French OAT was yielding 3.352 per cent late in the day against 3.316 per cent.

Bond prices and yields move in opposite directions.

In London on Tuesday, the euro changed hands at $1.3390 against $1.3386 late in New York on Monday, 111.86 yen (111.71), 0.8481 pounds (0.8444) and 1.2872 Swiss francs (1.2967).

The dollar stood at 83.54 yen (83.44) and 0.9611 Swiss francs (0.9681).

The pound was at $1.5786 (1.5862).

On the London Bullion Market, the price of gold fell to $1,394.50 an ounce at the fixing from $1,399 late on Monday.