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    Yen trades lower on disappointing producer prices

    The Japanese yen edged lower against the dollar on Monday morning, after producer prices came in below expectations, while the Australian dollar rose and the New Zealand dollar fell against their U.S. counterpart.

    The USD/JPY pair was up 0.26% to 108.93. In Japan, PPI data for April dropped 0.3% on a month-over-month basis, exceeding the 0.2% decrease expected, while declining 4.2% on a year-over-year basis, more than the 3.7% fall expected.

    AUD/USD gained 0.23% to trade at 0.7290, recovering from Friday’s two-month low of 0.7250, while the NZD/USD pair slipped 0.13% to 0.6775. The U.S. dollar index was steady at 94.57, still close to Friday’s three-week high of 94.84.

    On Friday, the greenback jumped to one-month highs against its major peers, after strong U.S. reports on retail sales and consumer sentiment eased investor concerns over the state of the U.S. economy.

    The U.S. dollar index advanced 0.52% to 94.6, marking the highest level since late April.  The index finished the week with 0.76% gains, its second straight weekly gain.

    A report from the U.S. Commerce Department showed that retail sales surged 1.3% in April, exceeding analysts’ expectations for a 0.8% rise. This was the largest monthly rise since March 2015.

    The greenback was also underpinned by data indicating that U.S. consumer sentiment improved in May. The preliminary reading of the University of Michigan inched up to 95.8 in May from 89.0 in April, well above expectations for a 90.0 print, signaling the highest reading since June 2015.

    The optimistic data soothed investor concerns over the outlook for the world’s largest economy, while fueling expectations that the Fed could hike rates sooner than expected.  

    The greenback rose to two-week highs against the single currency and the sterling, with EUR/USD losing 0.55% and GBP/USD falling 0.48% to 1.4371.  

    In the euro bloc, official data released on Friday revealed that first quarter growth was downwardly revised to 0.5% from an initial projection of 0.6%. Annual growth also deteriorated to 1.5%, from a previously reported reading of 1.6%.

    The cable remained under pressure after the International Monetary Fund warned on Friday that a possible U.K. exit from the European Union could ignite a stock market crash and a sharp fall in house prices.

    The dollar ticked down against the yen, with USD/JPY falling 0.35% to 108.61 late Friday, staying above the 18-month bottom of 105.54 hit earlier in the month, after the BoJ decided to keep monetary policy unchanged.

    Today, investors will be looking ahead to data on manufacturing activity in the New York area due later in the day, for new signals on the health of the economy.

    In the week ahead, focus will be turned on Tuesday’s data on U.S. inflation and Wednesday’s minutes of the Federal Reserve’s April meeting for indications on the timing of future rate hikes. Preliminary data from Japan on first quarter growth and jobs report from the U.K. and Australia will also be closely monitored. 

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