LONDON, Aug 18 (Reuters) - The dollar hovered around a two-month high on Friday, set for a fifth consecutive week of gains in the longest winning streak for 15 months, buoyed by demand for safer assets on worries over China's economy and bets U.S. interest rates will stay high.
The People's Bank of China set a much-stronger-than-expected daily fixing, lifting the yuan from a 9-month low hit on Thursday, while sterling fell after British retail sales weakened more than expected in July.
China's securities regulator unveiled a package of measures aimed at reviving a sinking stock market, but investors said they would do little to boost confidence if the economy remains sluggish. "High yields and growing risks in China suggests the balance of risks is moderately tilted to the upside for the dollar," he added.
Strong economic data this week, particularly retail sales, had already bolstered the case for additional tightening.Elsewhere, sterling fell 0.2% against the euro to 85.51 pence after British retailers reported a bigger-than-expected drop in sales in July as heavy rain put off shoppers who are also feeling the hit from high inflation and 14 back-to-back increases in interest rates.The euro edged 0.1% lower at $1.0861, after touching on Thursday a six-week low of $1.0856.
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