American focus: Dollar on track for worst day in a week after disappointing data

Dollar is down 1.1% against euro, on track for its largest one-day drop since March 6

The dollar was having its worst day in two weeks Wednesday, as several disappointing reports on the U.S. economy prompted investors to rethink the timing of the Federal Reserve's first interest-rate increase since 2006.

The dollar was down more than 1.1% against the euro after the data. On March 6, the dollar finished 1.2% lower against the shared currency.

Economists and analysts had expected retail sales to rebound in April after three months of declines. Instead, spending was flat, with sales excluding automobile sales increasing by a paltry 0.1%, according to the Commerce Department falling short of the consensus forecast of 0.4% from a MarketWatch survey of economists.

Prices of goods exported from the U.S. dropped 0.7% in April, missing a consensus estimate for a 0.2% and 0.3% decline.

The dollar continued to weaken after the Commerce Department announced that March business inventories rose by 0.1%, lower than the 0.2% increase that economists had expected.

Omer Esiner, chief market analyst at Commonwealth Foreign Exchange, said that the retail-sales number -- which was today's marquee data release -- was a "big disappointment," providing more evidence that the widely anticipated spring rebound for the U.S. economy has been "very lackluster."

"This is the type of number that's going to remove the possibility of a Fed rate hike in June, and it raises further doubts about the likelihood of a July or September move by the Federal Reserve," Esiner said.

The timing of the Federal Reserve's first interest-rate increase since 2006 continues to be the most significant factor driving trading in the foreign-exchange market, Esiner said. The Fed has repeatedly promised to be "data dependent" when determining the timing of the first rate increase, and any data that could give policy makers cause to delay a hike would likely weigh on the dollar.

Higher interest rates would increase the return on dollar-denominated deposits and support the currency by attracting more flows from foreign investors.

The buck retreated Tuesday after two sessions of moderate gains. The U.S. currency depreciated against the euro for a fourth consecutive week last Friday, and is down nearly 1% against the euro so far this week.

The dollar has depreciated more than 8% against the shared currency since it reached a more than 12-year high in mid- March.