* Dollar recovers only slightly vs euro, yen
* Wednesday saw biggest daily falls since last July
* Eyes on UK retail sales
* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh
By Patrick Graham
LONDON, May 18 The dollar wallowed near
six-month lows against a basket of major currencies on Thursday,
struggling to recover from its worst losses in almost a year
against the yen and the euro as worries over the Trump
The dollar recovered around half a percent against the yen
in Asian trading after a combination of recently poor U.S. data
and revelations about the investigation of Trump's ties to
Russia drove its biggest daily fall since last July.
But it was quickly back on the defensive in early European
deals, trading flat on the day against the basket of currencies
used to measure its broader strength and up just 0.2 percent
from its lows against the yen and euro.
In the past seven days, it has fallen more than 3 percent
against the yen and 2.5 percent versus the basket.
"After the massive rally in bonds yesterday we have seen
something of a snapback," said Jeremy Stretch, head of currency
strategy with CIBC World Markets in London.
"It remains to be seen whether we can move on from the
political issues around Trump and Russia. We haven't been dollar
bulls for a while and even if we see some more recovery this
does just look like the tail-end of the dollar's run (higher)."
By 0740 GMT, the dollar index was virtually unchanged at
97.616, having fallen as low as 97.333 on Wednesday, its
lowest since Nov. 9.
Under pressure from Congress, the Justice Department late on
Wednesday named former FBI chief Robert Mueller as special
counsel to investigate alleged Russian interference in the 2016
U.S. election and possible collusion between President Donald
Trump's campaign and Moscow.
The row has further undermined faith in the White House's
ability to deliver a promised boost to U.S. growth and
But a number of European-based strategists at major banks
argued on Thursday that the dollar's latest retreat is more
about a run of poorer data that undermines expectations for
further rises in Federal Reserve interest rates this year.
Expectations for a Fed move in June fell back to around 60
percent on Wednesday from close to 90 percent last week.
"While there could be a meaningful dollar recovery on the
horizon, the short-term picture still suggests room for a little
more weakness," said Joel Kruger, a strategist with LMAX
Exchange in London.
"It's important to note that this move in the dollar was
already in play, with the market assigning too much of the
weakness to this political distraction. The US administration's
protectionist policies and softer data have been the primary
The big set-piece of the European morning is UK retail
sales. Another weak number would add to concerns over how much
longer British consumers can prop up an economy struggling in
the face of the risks from its planned exit from the European
Those underlying worries have stopped sterling, up strongly
last month, from breaking through $1.30. It traded at $1.2957 on
For Reuters Live Markets blog on European and UK stock
markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets
(Writing by Patrick Graham; editing by Ralph Boulton)