The euro extended gains against the dollar on Thursday after surprisingly weak U.S. February retail sales data, recovering from an earlier 12-year low.
Since the start of the year the euro has suffered a 12 percent decline, careening toward parity with the greenback as monetary policies in Europe, and elsewhere around the world, ease. This is in contrast to stronger U.S. economic growth and expectations the Federal Reserve will start raising interest rates later this year, attracting cash seeking higher returns.
While that trend remains intact, the dollar weakened after a report detailed a surprising 0.6 percent drop in U.S. retail sales amid harsh weather in February versus expectations for a gain of 0.3 percent.
"I think we're finally seeing some early signs of fatigue in the dollar's rally," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington, D.C.
"Caution is on the rise ahead of next week's Fed meeting. On the one hand, steady job growth has many expecting the Fed to lay the ground work for an eventual rate hike. But this rapid rise in the dollar could warrant a warning from the Fed as a potential threat to growth," he said.