Forex - Dollar mixed to lower as ECB comments spark euro rally

Investing.com - The dollar traded mixed to lower against most major currencies on Friday after a key European Central Bank official warned against keeping interest rates low, which sparked demand for the euro.

In U.S. trading on Friday, EUR/USD was up 0.45% at 1.3753.

European Central Bank Governing Council member Jens Weidmann said earlier that keeping interest rates low may endanger political reforms.

According to Germany’s Bild newspaper, Weidmann said low inflation shouldn’t be used to justify loose monetary policy.

"We must take care to raise interest rates again in a timely manner should inflation pressures build," he reportedly said, and his comments sent the euro firming against the dollar.

The euro shot up by more than 1% earlier though it trimmed gains shortly afterwards.

The dollar, meanwhile, saw some support from U.S. Department of Labor Thursday data revealing that the number of individuals filing for initial jobless benefits declined by 42,000 to a seasonally adjusted 338,000 last week.

Analysts were expecting U.S. jobless claims to fall by 35,000 to 345,000 from the previous week’s revised total of 380,000, which was the highest since March.

The upbeat data supported views that the U.S. economy will be strong enough to allow the Federal Reserve to continue scaling down stimulus through 2014, which cushioned the dollar somewhat.

The greenback was down against the pound, with GBP/USD up 0.37% at 1.6471.

The dollar was up against the yen, with USD/JPY up 0.31% at 105.13, and down against the Swiss franc, with USD/CHF down 0.54% at 0.8918.

In Japan, hit-or-miss data weakened the yen against the single currency.

Official data earlier showed that household spending in Japan fell 0.2% in November compared to a year earlier and after a 0.9% rise in October. Analysts had expected household spending to increase by 1.7% last month.

A separate report showed that Tokyo's core consumer price inflation, which excludes fresh food, rose at an annualized rate of 0.7% in December, in line with expectations, after a 0.6% rise the previous month.

Preliminary government data also showed that industrial production in Japan ticked up 0.1% last month, confounding expectations for a 0.4% increase after rising 1% in October.

In addition, data showed that Japan's retail sales rose 4% in November on year, above expectations for a 2.9% gain. October's retail sales rose 2.3%.

The dollar was up against its cousins in Canada, Australia and New Zealand, with USD/CAD up 0.59% at 1.0711, AUD/USD down 0.34% at 0.8866 and NZD/USD trading down 0.13% at 0.8155.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.22% at 80.49.