Forex - Dollar gains on sentiment data, Fed comments


Shutterstock photo - The dollar rose against most of its peers in U.S. trading on Friday after a widely followed consumer sentiment gauge beat expectations earlier, one day after Federal Reserve officials said stimulus programs may begin winding down this year.

Stimulus measures, such as the Fed's monthly USD85 billion bond-buying program, weaken the greenback by flooding the economy full of liquidity to keep interest rates low and encourage investing and hiring.

Weak indicators released in the U.S. earlier this week had markets betting that such policies will stay in place possibly into next year to keep the economy going before it can stand on its own.

In U.S. trading on Friday, EUR/USD was down 0.42% at 1.2829.

In the U.S. earlier, the Thomson Reuters/University of Michigan's preliminary consumer sentiment index rose to 83.7 in May from 76.4 in April, surging past expectations for a rise to 78.0.

The report added inflation expectations for this month remained unchanged at 3.1%.

The numbers came a day after Federal Reserve Bank of San Francisco President John Williams said that monetary authorities may begin to unwind stimulus programs this summer and possibly end such policies by year end.

Philadelphia Fed President Charles Plosser, a known inflation hawk, added separately that the Fed should consider scaling back the program next month.

The greenback, meanwhile, was up against the pound, with GBP/USD trading down 0.65% at 1.5170.

The dollar was up against the yen, with USD/JPY up 0.94% at 103.22, and up against the Swiss franc, with USD/CHF trading up 0.87% at 0.9732.

The dollar was up against its cousins in Canada, Australia and New Zealand, with USD/CAD up 0.91% at 1.0285, AUD/USD down 0.74% at 0.9736 and NZD/USD trading down 1.07% at 0.8068.

Canada's consumer price index contracted 0.2% in April from March, defying expectations for a 0.1% gain.

The country's core CPI, stripped of volatile food and energy costs, rose 0.1%, less than market expectations for a 0.2% gain, sparking talk the Bank of Canada has room to trim interest rates if need be.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.58% at 84.39.

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This article appears in: Investing , Forex and Currencies

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