Dollar slips further from one-month high vs euro

TOKYO, May 14 (Reuters) The dollar slipped on Monday, pulling further away from a one-month high hit against the euro late last week as investors shifted funds to higher-yielding currencies following robust New Zealand consumer spending data.

The yen edged up against the dollar after data showing Japan's current account surplus soared 36.9 percent in March to a record 3.3172 trillion yen ($27.60 billion) and wholesale prices rose more than expected in April, keeping the Bank of Japan on track for a rate increase later this year.

''The price data was very surprising. This was enough to fuel concerns that the BOJ may hike rates earlier than expected,'' said Tomoko Fujii, a senior economist and strategist at Bank of America in Tokyo.

Expectations are mounting for the BOJ to lift rates to 0.75 percent from the current 0.50 percent in the third quarter.

So far the yen has suffered despite the end of zero rates in Japan because yields abroad are so much higher, prompting Japanese investors to shift more funds abroad and market players to borrow the low-yielding yen to buy higher-yielding assets in the carry trade.

The New Zealand dollar jumped nearly half a percent after a report showed retail sales rose 3.8 percent in the first quarter from the previous quarter, the strongest since the data series began in 1995.

The figures contrasted with data on Friday showing an unexpected drop in U.S. retail sales in April and suggested the Reserve Bank of New Zealand may be forced to lift its rates, already the highest among industrialised countries, further from 7.75 percent.

The New Zealand data highlighted the strength of economies outside the United States that has hurt the dollar and boosted the euro and sterling, with euro zone and British short-term rates expected to rise further and lure yield-seeking funds.

The euro rose 0.1 percent to $1.3542 pulling up from a one-month trough of $1.3462 struck on Friday and not far from the single currency's all-time peak of $1.3683 struck in late April.

The dollar edged down to 120.07 yen from near 120.20 yen in late New York trade on Friday. The euro was little changed near 162.60 yen holding close to the record high of 163.60 yen hit in April.

The New Zealand dollar, also known as the kiwi, jumped as high as $0.7384 and pushed back towards a 22-year high of $0.7493 hit in April.

Bank of America's Fujii said the kiwi's gains could be limited as the strong economic data may prompt the government to consider other measures to cool a red-hot property market to help slow growth.

''If they change the method to constrain the real estate market, that might not be as positive as before for the kiwi,'' Fujii said.

New Zealand Finance Minister Michael Cullen is due to present the budget for the 2007/08 fiscal year on Thursday.

REUTERS PDS VP0655