The dollar fell against the euro on Friday after a gauge of US consumer sentiment came in below forecasts, reducing expectations for a rise in official US interest rates that would boost demand for dollars.
The University of Michigan consumer sentiment index came in at 94.2 in early May, unchanged from April's final reading and undershooting economists' predictions for a rise to 96.5.
The dollar swiftly retreated, with the single European currency pushing to session highs around $1.1901, from around $1.1840 shortly prior to the survey's release to subscribers.
"Michigan was a touch below consensus. The dollar may pull back a little, especially against interest-rate-sensitive currencies," said Daniel Katzive, foreign exchange strategist with UBS in Stamford, Connecticut.
Some traders had started betting the Federal Reserve would raise rates a half percentage point as soon as late June, but many now expect only a quarter-point hike, partly because of the softer than expected Michigan report, Katzive said.
On balance, interest rate rises would be viewed as a boost to the greenback as they would burnish the allure for overseas investors of higher-yielding dollar-denominated assets.
Midmorning in New York, the euro was trading at $1.1884, up about 0.6 percent on the day. Against the yen the dollar was trading at 114.11 yen, down about 0.4 percent. Against the Swiss franc, the dollar was trading down about 0.5 percent to 1.2942 francs.
Sterling was trading virtually flat around $1.7613.
Earlier, the dollar steadied against the euro in the wake of stronger-than-expected US April industrial production.
The Fed reported that industrial production gained a larger-than-foreseen 0.8 percent, while production capacity in use rose to 76.9 percent, the highest since July 2001.
Also earlier, the dollar slipped against the euro after the US April consumer price index was up 0.2 percent, lower than economists' forecasts for a rise of 0.3 percent.
That modest reading reduced some traders' expectations for Fed rate hikes this summer, weighing on the dollar, some said.
Excluding food and energy, prices rose 0.3 percent, overstepping forecasts for a rise of 0.2 percent.
On Thursday, US producer prices had come in above the consensus view.
By contrast, the US Treasury market's reaction to the CPI report was indecisive, in part because the bond market seemed to be troubled by the rise in the core CPI.
The upward march of dollar-denominated Treasury bond yields over the past several weeks in anticipation of Fed rate hikes has tended to support the greenback by increasing the appeal of these dollar-denominated assets to foreign investors.
"If you are dollar-bullish the number is mildly disappointing ... because investors were positioning for a strong increase in CPI that would be likely to force the Fed's hand to raise rates," said John Beerling, regional foreign exchange trading desk manager for Wells Fargo in Minneapolis.
Earlier in the global day, the dollar rose against the euro and Swiss franc and touched an eight-month peak against the yen as traders positioned ahead of the CPI data, with some betting the report might bring forward the date of a Fed rate hike, a view which to some extent was thwarted by the CPI report.
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