Dollar Mixed on Woes of U.S. Retailers

NEW YORK -- The dollar traded mixed against major currencies Friday as tumbling retail sales in the U.S. and confirmation that the euro-zone was in recession sent stocks lower ahead of a Group of 20 meeting this weekend in Washington.

The 15-nation euro slipped to $1.2678 in morning trading in New York from $1.2695 late Thursday, dropping off its overnight high of $1.2823. Meanwhile, the British pound, which hit a 6½ year low against the dollar and a record low against the euro Thursday, recovered to $1.4817 in morning trading from $1.4671 late Thursday.

The dollar edged up to 96.75 Japanese yen from 96.39 yen late Thursday in New York.

In the U.S., the Commerce Department said that retail sales fell 2.8% in October from September, the biggest drop since record-keeping began. It was the fourth straight monthly drop, led by huge declines in auto purchases.

Also on Friday, the government said businesses cut back on inventories by 0.2% in September, the largest pullback in more than three years. It was the first drop in inventories since March 2007 and another hint of how businesses are hurting in the face of declining consumer spending.

The economic reports, a huge $25 billion third-quarter loss posted by Freddie Mac (FRE Quote), the mortgage finance company taken over by the government, and lower profits from major retailers, drove stocks down. The Dow Jones industrials were down by 280 points to about 8,555 in late morning trading.

Meanwhile, the European Union confirmed a recession for the euro-zone, whose 15 member countries' economies contracted for the second consecutive quarter. The euro zone shrank 0.2% in the second and third quarters compared to the respective previous quarters, bolstering expectations of more interest-rate cuts by the European Central Bank.

The ECB cut rates by a half-percentage point to 3.25% earlier in November. The Bank of England cut its rate to 3%, and more cuts are expected by the BoE as well.

Cutting interest rates can prompt economic growth, but it also can undermine a currency as investors transfer funds in search of better returns.

The Group of 20 meeting this weekend could possibly yield some decisions about mending the troubled global financial system and provide direction for the future of currency and credit markets. On Friday morning, Federal Reserve Chairman Ben Bernanke, at a conference in Frankfurt, Germany, hinted that more interest rate cuts by the Fed were coming and pledged to work with other central banks to try to amend the global financial mess.

The Fed's benchmark rate stands at 1%.

In other New York trading, the dollar edged up to 1.1919 Swiss francs from 1.1912 late Thursday, and slipped to 1.2230 Canadian dollars from 1.2264.