(Updates prices, adds analyst comment in paragraphs 3, 4, 11 and 12, updates FX table, previous dateline
NEW YORK/LONDON)
By Laura Matthews
NEW YORK, May 12 (Reuters) - The U.S. dollar rose against the euro and sterling on Friday, and was
on track for its biggest weekly gain since February, as investors shifted to safe havens after consumer
sentiment data fueled concern about the U.S. debt ceiling and monetary policy.
A University of Michigan survey on Friday showed May U.S. consumer sentiment slumped to a six-month low
on worries that political dispute over raising the federal government's borrowing cap could trigger a
recession. Consumers' long-term inflation expectations jumped to their highest since 2011. That could
influence the Federal Reserve which signaled last week that it could pause its interest-rate hikes.
"Rate differentials are continuing to tilt in the dollar's favor," said Karl Schamotta, chief market
strategist of Corpay in Toronto.
"The surprises in the University of Michigan consumer sentiment survey are painting sort of a
stagflationary picture for the U.S. economy and one that could justify another rate hike at the June Fed
meeting, but certainly will diminish odds of rate cuts in the latter half of the year."
Recent data showing a slowing economy has boosted the case that the Fed will pause hiking rates at its
June meeting. Data also showed U.S. consumer price index inflation cooling to 4.9% year-on-year in April.
Moreover, weekly jobless claims rose more than expected.
But the labor market remains tight, with 1.6 job openings for every unemployed person in March, well
above the 1.0-1.2 range consistent with a market not generating too much inflation.
Fed Governor Michelle Bowman said the central bank will probably need to raise rates further if
inflation stays high.
The pound fell 0.5% to $1.2448, while the euro weakened 0.6% to $1.0851, a day after
falling to a one-month low.
That left the dollar index up 0.6% at 102.69, notching a weekly gain of 1.4% - its biggest weekly
rise since February.
Joe Manimbo, senior market analyst at Convera, noted that elevated U.S. inflation spurred some
skepticism about the Fed's year-end rate cuts, and that the view that other central banks may be closer to
pausing rate hikes as well has weighed on European currencies.
"Dollar gains this week have been multidimensional. The buck has served as a safe harbor from worries
about a weak Chinese economy and volatility on Wall Street," Manimbo wrote.
"While stronger, it's too soon to tell whether the dollar's run of weakness has turned the corner.
Markets would need to take rate cuts off the table to lend meaningful upside traction to the greenback."
Futures traders see a pause in June, and the fed funds falling later in the year. The Fed's target range
stands at 5% to 5.25%, having risen rapidly from 0% since March 2022. ========================================================
Currency bid prices at 2:41PM (1841 GMT)
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Previous Change
Session
Dollar index 102.6900 102.0900 +0.60% -0.773% +102.7100 +101.9300
Euro/Dollar $1.0849 $1.0915 -0.60% +1.26% +$1.0936 +$1.0849
Dollar/Yen 135.6900 134.5550 +0.84% +3.49% +135.7500 +134.4100
Euro/Yen 147.22 146.85 +0.25% +4.93% +147.4600 +146.6700
Dollar/Swiss 0.8979 0.8944 +0.39% -2.89% +0.8985 +0.8899
Sterling/Dollar $1.2445 $1.2513 -0.54% +2.91% +$1.2540 +$1.2445
Dollar/Canadian 1.3564 1.3490 +0.56% +0.12% +1.3565 +1.3481
Aussie/Dollar $0.6636 $0.6702 -0.98% -2.64% +$0.6706 +$0.6637
Euro/Swiss 0.9740 0.9759 -0.19% -1.57% +0.9767 +0.9725
Euro/Sterling 0.8715 0.8723 -0.09% -1.46% +0.8732 +0.8694
NZ $0.6182 $0.6297 -1.78% -2.59% +$0.6300 +$0.6185
Dollar/Dollar
Dollar/Norway 10.6900 10.6770 +0.03% +8.82% +10.7190 +10.6480
Euro/Norway 11.6005 11.6517 -0.44% +10.50% +11.7088 +11.5820
Dollar/Sweden 10.3921 10.3324 -0.04% -0.15% +10.3941 +10.2917
Euro/Sweden 11.2701 11.2746 -0.04% +1.08% +11.2933 +11.2252
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World FX rates Dollar index ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Reporting by Laura Matthews; Editing by Andrew Heavens, Nick Macfie and Richard Chang)
