FOREX-Euro dips from 14-month high but expected to stay firm
* Euro off 14-month high vs dollar but uptrend seen intact
* German retail sales data and Deutsche Bank results weigh
* Fed keeps bond-buying stimulus in place
* Month-end flows seen keeping euro/dollar in a range
(Adds details, quotes) LONDON, Jan 31 (Reuters) - The euro edged lower on Thursday, dampened by weak German retail sales data and signs of a slowdown in the U.S. economy, though it stayed near its recent highs and was expected to continue climbing in the coming weeks. Traders said the euro was also influenced by month-end flows which could trap it in a range and leave it below a reported option barrier at $1.3600. The euro was down 0.1 percent at $1.3550, though not far from Wednesday's high of $1.3588, its strongest level since November 2011. Data showed retail sales in Europe's largest economy slid by their largest amount in over three years in December, but this was partially offset by solid jobs figures. A huge fourth-quarter loss reported by Deutsche Bank also weighed on the euro, while the safe-haven dollar rose against riskier, growth-linked currencies after data on Wednesday showed the U.S. economy contracted in Q4 2012.
"We had weak German retail sales data which is weighing on the euro," said Chris Turner, head FX strategist at ING. "But it's only a dip and given the sharp move we have had, this was bound to happen. As long as the ECB does not express concern about the currency's strength, it will be tough for the trend to turn." Any losses were seen limited, with bids cited below $1.3530 and option expiries reported at $1.3550. Despite Thursday's dip, the euro has gained nearly 3 percent this month. The euro has gained broadly recently as easing euro zone debt worries have prompted investors to reinvest in the region after shunning it for much of last year due to concerns about the risk of the bloc breaking up. "The euro could rise a few more percent from here," said Richard Falkenhall, currency strategist at SEB in Stockholm. "People are not buying euros on growth prospects, the (recent) rise is more because of investors increasing the weighting of euros in their portfolios which they had cut last year." He said he expected the euro to rise to around $1.38 by the end of the second quarter but said lingering concerns about problems on the euro zone's periphery would keep it from rising as high as $1.40. Against the yen, the euro was down 0.2 percent at 123.34 yen, off a 33-month peak of 123.87 yen set on Wednesday. The single currency has gained 7.7 percent against the yen this month.
CENTRAL BANKS The euro has also gained as banks have paid back ultra-cheap loans to the European Central Bank, tightening monetary conditions in the euro zone. This contrasts with the ultra-loose policies in the United States and Japan. The U.S. Federal Reserve pledged on Wednesday to keep its stimulus policy in place, saying the measures were needed to lower unemployment, and a senior Bank of Japan official on Thursday signalled more stimulus would be forthcoming if needed.
European politicians have ramped up talk of a 'currency war' as the euro has been the biggest beneficiary of the yen's and the dollar's weakness. But ECB policymakers have maintained a view that the euro is well within its long-term averages, reflecting little desire to curb its recent strength. The dollar slipped 0.1 percent to 90.95 yen, having hit a 2-1/2 year high of 91.41 yen on Wednesday, its strongest level versus the yen since June 2010. Traders said reportedly large options expiries due later on Thursday at 90.00 and 91.50 yen were likely to keep the dollar within this week's range from 90.325 to 91.41 yen. Focus will now turn to U.S. jobs data on Friday for a take on the health of the world's biggest economy.
(Additional reporting by Anirban Nag; Editing by Catherine Evans)