The dollar hovered below a 4-½-month high versus a basket of major currencies on Friday after soft U.S. inflation data prompted traders to reduce wagers on quicker rate hikes.
U.S. consumer prices increased less than expected in April, which would support gradual, rather than more aggressive, rate increases by the Federal Reserve. The so-called core CPI, which strips out the volatile food and energy components, rose 0.1 percent from previous month, compared to economists’ median forecast of 0.2 percent rise.
Investors cut their expectations for four Fed rate hikes following the release of the inflation data. The Fed has already raised rates once this year and is widely expected to go two more times in 2018.
The dollar index against basket of six major currencies edged up 0.1 percent after falling the most since late March in overnight trade. On the week, it was up 0.1 percent, the fourth consecutive week of gains if sustained by the end of the day.
While dollar bulls expect U.S. yield advantages to support the dollar in the near term, others say its rally appeared to be running out of steam.
The euro jumped back to $1.1915 from Wednesday’s 4-½-month low of $1.1823.
The common currency has so far weathered the impact from rises in Italian bond yields on signs the country’s two anti-establishment parties could sweep into power as they made “significant steps” towards forming a government.
Against the yen, the common currency rose to 130.38 yen, extending its recovery from its six-week low of 129.24 yen set on Tuesday.
The dollar eased to 109.45 yen from Thursday’s peak of 110.02 yen and off its three-month top of 110.05 yen touched on May 2.
The material has been provided by InstaForex Company – www.instaforex.com