The dollar rose against the euro and yen on speculation a rebound in US retail sales will support the Federal Reserve's case for raising interest rates.

The currency gained for a third time in four days as a Commerce Department report will probably show consumers increased spending in May, when the government sent out more than $US50 billion in tax-rebate checks. The Australian dollar fell to a one-month low after the economy unexpectedly lost jobs for the first time in 19 months.

"Retail sales data should be supportive for the dollar,'' said Takahide Nagasaki, senior currency strategist in Tokyo at Daiwa Securities SMBC, a unit of Japan's second-largest brokerage.

"Tax rebate checks should have contributed to them. Good figures will also further raise expectations of higher rates.''

The US dollar rose to $1.5473 per euro in London from $1.5552 late yesterday in New York. The US currency rose to 107.31 yen from 106.96 yen. The euro fell to 165.99 yen from 166.33 yen. The dollar may rise to 110 yen and $1.45 a euro by year-end, Mr Nagasaki said.

The Australian dollar fell to 93.82 US cents from 94.70 US cents yesterday in New York. Companies cut 19,700 workers last month, the Australian Bureau of Statistics said today. The median estimate in a Bloomberg News survey was for a 13,500 gain. The currency slid to 100.67 yen from 101.29.

The dollar index, a gauge of its value against six other currencies, gained to 73.536 and approached the highest level in one week. The US currency rose to $1.9577 against the British pound from $1.9632, and climbed to 1.0383 against the Swiss franc from 1.0317.

US retail sales probably increased 0.5% in May following a 0.2% drop the previous month, according to a Bloomberg News economist survey before a report due at 8.30am New York time. The greenback surged 2% against the euro on June 9-10 after Fed chairman Ben Bernanke said the risk of a substantial economic downturn had "diminished''.

"The dollar could draw support from the retail sales data,'' said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow, Japan's largest currency broker.

"Improvement in consumer spending may help ease concern that the economy is facing the worst-case scenario.''

The dollar may rise to 107.50 yen today, Mr Ishikawa said.

Traders now bet Fed policy makers are more likely to raise interest rates in August than to leave them unchanged. Fed funds futures on the Chicago Board of Trade show a 51% probability policy makers will raise rates by at least a quarter -percentage point in August, compared with no chance a week ago.

The US currency may also be supported by speculation that finance ministers from the Group of Eight countries will make comments discouraging the currency's decline at two days of meetings starting in Osaka tomorrow.

While ministers may talk about foreign exchange, the final communique probably won't mention currencies, a Japanese Finance Ministry official, who asked not to be identified, said yesterday. The G-8 comprises the US, Japan, Germany, Britain, France, Russia, Italy and Canada.

"It's also likely that the dollar rebound will resume going into the weekend's G-8 meeting as traders focus on likely greenback-supportive remarks from policy makers,'' John Kyriakopoulos, a currency strategist at National Australia Bank in Sydney, wrote in a research note today.

The dollar declined 0.5% yesterday after European Central Bank council member Athanasios Orphanides yesterday said policy makers may increase the 4% main refinancing rate more than once in coming months based on "subsequent data developments.''

"They're trying to manage expectations in Europe, while they don't want the market to drive up the euro to record highs,'' said Michael Woolfolk, senior currency strategist in New York at Bank of New York Mellon, the world's largest custodial bank, with about $US23 trillion in assets under custody.

"That's creating a fair bit of volatility in the market.''

Bloomberg