By Chuck Mikolajczak
NEW YORK (Reuters) – The U.S. dollar was lower on Friday, after data showing consumer sentiment dipped, but the greenback was still on track for a ninth straight week of gains, while the yen weakened to a 10-month low.
The University of Michigan’s preliminary reading of its Consumer Sentiment Index dropped to 67.7 this month from a final reading of 69.5 in August and below the forecast of 69.1 among economists polled by Reuters. However, consumers saw inflation lower on both a one-year and five-year basis.
Earlier data from the Labor Department showed import prices increased 0.5% last month as fuel prices jumped, but underlying price pressures stayed subdued while a separate report from the New York Fed showed factory activity picked up in the state in September.
“None of the data currently points to a recession. Nevertheless, the fed futures still points to the end of next year, a lower rate,” said Joseph Trevisani, senior analyst at FXStreet.com.
“If the credit markets are still convinced that when you increase rates as much as the Fed has, you eventually get a recession … where do people go? They go to the dollar.”
The Federal Reserve will hold a policy meeting next week on Sept. 19-20 and the central bank is largely viewed as keeping interest rates unchanged, with a 97% expectation for no action, according to CME’s FedWatch Tool. After edging higher earlier in the week, expectations for a 25 basis-point cut at the November meeting have declined to 30.6% from 43.6% a week ago.
Markets were adjusting to a new outlook for central bank rate hikes after the European Central Bank on Thursday raised rates to a record high of 4% but signaled the hike was likely to be its last. Euro zone bond yields and the euro fell as investors bet the central bank would start cutting rates next year.
The U.S. dollar index was down 0.19% on the day at 105.20, but was still poised for its ninth straight weekly gain, which would mark its longest weekly run since a 12-week streak of gains in 2014.
The greenback continued to strengthen against the yen, after the Japanese currency had a sharp move higher versus the dollar earlier in the week. The dollar was last up 0.12% at 147.65 yen after hitting a 10-month high of 147.96.
The euro was up 0.2% at $1.06735, having recovered slightly from Thursday’s six-month low of $1.0629 following the European Central Bank’s (ECB) policy announcement, in which the central bank raised rates to a record-high 4% but signaled it was likely done with hikes.
Sterling traded at $1.24075, edged down 0.16% at $1.23905. Along with the Fed, the Bank of England will also make a policy announcement next week.
(Reporting by Chuck Mikolajczak in New York; Editing by Matthew Lewis)