* Bank relief seen reducing FX impact of ECB stimulus
* U.S. retail sales increased more than expected in August (New throughout, updates trading and comments to U.S. market open, new byline, changes dateline, previous LONDON)
By Karen Brettell
NEW YORK, Sept 13 (Reuters) - The euro gained against the dollar on Friday for the second day after the European Central Bank on Thursday exempted euro zone banks from a penalty charge, which analysts say will reduce the currency impact of new stimulus.
The ECB on Thursday cut its deposit rate to a record low -0.5% from -0.4% and said it will restart bond purchases of 20 billion euros a month from November. The purchases will run for as long as necessary and end shortly before it starts raising the key ECB interest rates.
It also said that euro zone banks will be exempted from paying a penalty charge on idle cash worth six times their mandatory reserves.
“Cutting the deposit rate and introducing 'tiering' at the same time was likely to have a mixed impact on the EUR and that seems to be one of the reasons why the weakness in EURUSD on Thursday reversed abruptly,” Stephen Gallo, European head of FX strategy at BMO Capital Markets said in a report on Friday.
The single currency initially dropped on the new stimulus, testing more than two-year lows, before dramatically changing direction.
By exempting banks from the penalty charge the ECB aims to minimize stress in financial institutions that have been harmed by years of low rates.
“Tiering aims to protect the credit transmission channel, but reduces the FX impact of lower interest rates,” Morgan Stanley analysts said in a report.
The euro was last up 0.20% at $1.1083 The single currency fell as low as $1.0925 immediately after the ECB decision on Thursday.
Short covering as the euro failed to break below that level, and hopes of de-escalation in the U.S.-China trade war also helped turn the euro around after the ECB decision.
President Donald Trump said on Thursday he preferred a comprehensive trade deal with China but did not rule out the possibility of an interim pact, even as he said an "easy" agreement would not be possible.
Data on Friday showed that U.S. retail sales increased more than expected in August, pointing to solid consumer spending that should continue to support a moderate pace of economic growth.
That comes after better-than-expected producer price inflation data on Wednesday and consumer price data on Thursday.
The improving indicators are unlikely to sway the Federal Reserve from cutting interest rates when it meets next week.
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Previous Change
Session
Euro/Dollar EUR= $1.1083 $1.1061 +0.20% -3.37% +1.1109 +1.1056
Dollar/Yen JPY= 108.1000 108.0900 +0.01% -1.96% +108.2600 +107.9300
Euro/Yen EURJPY= 119.85 119.59 +0.22% -5.05% +120.0000 +119.5900
Dollar/Swiss CHF= 0.9876 0.9902 -0.26% +0.63% +0.9908 +0.9855
Sterling/Dollar GBP= 1.2455 1.2332 +1.00% -2.37% +1.2476 +1.2328
Dollar/Canadian CAD= 1.3222 1.3209 +0.10% -3.04% +1.3241 +1.3206
Australian/Doll AUD= 0.6873 0.6866 +0.10% -2.50% +0.6882 +0.6860
ar
Euro/Swiss EURCHF= 1.0950 1.0955 -0.05% -2.70% +1.0970 +1.0936
Euro/Sterling EURGBP= 0.8897 0.8969 -0.80% -0.97% +0.8975 +0.8895
NZ NZD= 0.6384 0.6403 -0.30% -4.96% +0.6409 +0.6377
Dollar/Dollar
Dollar/Norway NOK= 8.9593 8.9671 -0.09% +3.71% +8.9811 +8.9386
Euro/Norway EURNOK= 9.9311 9.9236 +0.08% +0.25% +9.9600 +9.9151
Dollar/Sweden SEK= 9.6109 9.6220 +0.06% +7.22% +9.6336 +9.5850
Euro/Sweden EURSEK= 10.6545 10.6478 +0.06% +3.80% +10.6775 +10.6290