NEW YORK (AFX) - The dollar was slightly stronger against the euro, but weaker against the yen early Tuesday, after news that U.S. retail sales increased at a slower-than-expected pace in February. The euro traded at $1.3347, down 0.09 percent. Immediately after the retail data news the euro spiked to $1.3397 before dropping again. The dollar stood at 104.50 yen, down 0.5 percent. The Commerce Department reported that U.S. retail sales increased 0.5 percent in February, led by purchases of electronics, clothing, gas and food outside the home. The average estimate of economists polled by MarketWatch was an increase of 0.7 percent. Sales in January and December were revised higher by a total of 0.8 percentage point. The 0.3 percent decline in January was reversed to a 0.3 percent gain. December sales were revised to a 1.3 percent increase. Analysts said February's slower-than-expected retail sales growth momentarily disappointed investors because the U.S. economy depends to a large extent on vigorous consumer spending. However, Michael Woolfolk, a senior currency strategist at the Bank of New York, described the February result as a "modest disappointment." Woolfolk also called the upward revisions to the January numbers "the more significant part of the report." "Overall, the report showed that above-trend growth in the U.S. economy continues to be fed by strong retail spending on behalf of the US consumer, despite higher interest rates and oil prices," Woolfolk said. Later in the morning investors will absorb January business inventories results. Economists surveyed by MarketWatch had forecast a 0.8 percent increase. Later Tuesday, investors will be watching Treasury International Capital System flow data for January, to gauge whether the U.S. attracted enough foreign inflows to fund January's trade deficit. Even more important than the headline figure on net portfolio flows is the net equity flow figure, J.P. Morgan analysts wrote in a research report. Equity investments aren't hedged for foreign-exchange swings to the extent that bond investments are, and therefore the flows have a greater currency market impact. Seasonal factors might also affect the January data, J.P. Morgan said. Net portfolio flows into the U.S. have bounced in January 12 out of the past 17 years. But market consensus is that inflows will fall slightly to $59 billion, J.P. Morgan said. On Wednesday, the fourth-quarter U.S. balance-of-payments report will be released. The MarketWatch expectation is for a quarterly deficit of $181.7 billion. This story was supplied by MarketWatch. For further information see www.marketwatch.com.
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