The US dollar edged higher against a basket of major currencies on Friday after strong US consumer sentiment data calmed nerves at the end of a week of severe market volatility. The Thomson Reuters/University of Michigan preliminary October reading on the overall index on consumer sentiment unexpectedly rose to 86.4, the highest since July 2007.
-- Greater market stability calms traders
-- Traders shrug off Yellen comments
The data eased concerns after worries surrounding the health of the global economy shook stocks, bonds and currencies markets this week. The dollar hit three-week lows against the euro and Swiss franc and a more than one-month low against the yen on Wednesday. "The market sold aggressively throughout the week, and now is thinking maybe they had taken this too far," said Jose Wynne, global head of FX research at Barclays in New York. He said Barclays still recommended buying the dollar.
He said the strong US data on consumer sentiment was a catalyst for the dollar's move higher, but that currencies broadly could face more volatility as traders await comments from the US Federal Reserve and the European Central Bank on monetary policy. The dollar index, which measures the greenback against a basket of six major currencies, was still on track for its second straight weekly drop.
The dollar gained slightly earlier in the session on greater stability in oil, stocks, and Treasuries markets. Despite Friday's gain, the benchmark US S&P 500 stock index was still on track for its fourth straight weekly decline, its longest streak in more than three years.
"Because we had the recovery in US stocks, we're seeing some of the easing of risk aversion contribute to the strength of the dollar against the yen," said Kathy Lien, managing director at New York's BK Asset Management. Commerce Department data earlier in the session showing US housing starts and permits rose in September had little impact on the dollar. Traders also shrugged off comments from Federal Reserve Chair Janet Yellen on the growth of US economic inequality.
The euro was last down 0.36 percent against the dollar at $1.2761, up from a session low of $1.2745. The dollar was up 0.52 percent against the yen at 106.87 yen after earlier hitting a session high of 106.89 yen. The dollar was up 0.39 percent against the Swiss franc at 0.9461 franc after hitting a session high of 0.9474 franc. The dollar index was up 0.26 percent at 85.185. On Wall Street, the S&P 500 was last up 1.36 percent, while US Treasuries prices fell on the US data and gains in US and European stock markets.
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