Dollar Slides as Retail Sales Disappoint, EU and Yen Rally

The US dollar weakened on Friday after official data showed an unexpected decline in retail sales in July. The figures, which primarily track goods spending and are not adjusted for inflation, pointed to softer consumer activity in the world's largest economy.

Retail sales fell 0.6% last month after a 0.2% increase in June, with economists surveyed by Reuters expecting a 0.1% rise. The weaker data reinforced concerns that economic momentum may be slowing, and recent inflation figures also came in softer than anticipated.

The dollar index declined 0.25% to 99.67, while the euro gained 0.32% to $1.1564 after touching its strongest level since June 17. Currency traders were monitoring developments surrounding the US conflict with Iran and diplomatic efforts to reopen the Strait of Hormuz.

The Japanese yen edged up 0.08% to 159.37 per dollar, but remained on course for a weekly decline of about 1%. Bank of America analysts said recent intervention had failed to reverse bearish sentiment towards the yen, with traders increasingly expecting either higher Japanese interest rates or another round of official currency purchases.