Dollar dips on Friday but shows biggest weekly gain in almost 3 months

London/New York

THE US dollar lost a little ground on Friday as high inflation wreaked havoc on consumer sentiment, but the greenback was on track for its biggest weekly gain in almost 3 months after a surprisingly strong US inflation print on Wednesday prompted investors to advance their bets for a US rate hike.

The dollar turned red on Friday morning after the University of Michigan survey showed a plunge in US consumer sentiment in early November to its lowest level in a decade as surging inflation cut into households' living standards, with few believing that policymakers are doing enough to mitigate the issue.

With short-dated US Treasury yields edging higher - 5-year bond yields rose to a February 2020 high - investors were ramping up bets this week that the Federal Reserve will have to raise interest rates sooner than expected.

The dollar was down 0.14 per cent at 113.915 yen after falling as low as 113.77.

Currency markets have been shaken up since Wednesday when data showed a broad-based rise in US consumer prices last month at the fastest annual pace since 1990, casting doubts on the Fed's stance that price pressure will be transitory.

The euro was down 0.06 per cent at US$1.1443 after falling earlier to an almost 16-month low at US$1.1433.

Sterling bulls received a slight reprieve on Friday as sterling/US dollar rebounded after hitting a fresh 2021 low, though the rise may only offer temporary solace as technical and fundamental factors pointed to further declines.

Sterling was last up 0.39 per cent against the dollar.

It had gained ground in late morning as the dollar weakened and after the European Union said that it was committed to coming to an agreement with the United Kingdom regarding Northern Ireland.

The risk-sensitive Australian dollar was up 0.53 per cent at US$0.733 after earlier sinking as low as US$0.7277 for the first time in more than a month. REUTERS