LONDON/NEW YORK- The US dollar lost a little ground as high inflation wreaked havoc on consumer sentiment, but the greenback was on track for its biggest weekly gain in almost three 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 policymakers are doing enough to mitigate the issue.
With short-dated US Treasury yields edging higher — five-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.
Against a basket of its rivals, at 1517 EST (2017 GMT) the dollar index was down 0.04 percent at 95.116 after falling as low as 94.991 in response to consumer sentiment. Earlier in the session it had risen to its highest level since July 2020.
“Consumers are clearly more worried about real income growth as inflation outpaces wages for now, and that is weighing on sentiment,” said Erik Nelson, macro strategist at Wells Fargo.
“That is feeding into growth worries for the dollar and pushing it lower against most currencies, especially the Japanese yen as US yields decline here.”
The dollar was down 0.14 percent at 113.915 yen after falling as low as 113.77.
