The dollar fell to a three-month low against the euro on Friday, as disappointing data on US domestic factory activity and consumer sentiment spurred doubts about the recovery in the world's largest economy. Against a basket of six major currencies, the dollar fell for a fifth straight week, the longest stretch of declines in four years. The dollar index was last down 0.3 percent at 93.204. "The weak US data has put a damper on hopes for a September rate hike, and with that, the US dollar's upward momentum will need much more in order to resume," said Adam Munguia, foreign exchange advisor, at Bank of the West in San Ramon, California.
On Friday, data on New York state manufacturing and readings on industrial output fell short of expectations, while a private gauge on US consumer sentiment unexpectedly fell to its lowest in seven months in early May. This down shift in the US economy has helped stem a global bond market rout that narrowed the yield gap between Bunds and US Treasuries and helped revive the euro. The gap between 10-year Bunds and Treasuries narrowed to 153 basis points, from around 180 bps about a month ago, making the euro more attractive to investors.
In late trading, the euro rose 0.4 percent to $1.1455, after earlier hitting a three-month peak of $1.1466. It was about 9 percent higher than a 12-year low of $1.0457 reached on March 16. That was the day the European Central Bank embarked on its 1.1 trillion euro bond-buying program, to which President Mario Draghi reiterated his commitment on Thursday.
The euro's rebound was partly helped by improved euro zone data and rising inflation expectations. On the other hand, dollar bulls have been disappointed by a recent spate of US data. First-quarter growth has been lacklustre and there has been little evidence of a rebound in the second quarter. Against the yen, the dollar was up 0.1 percent at 119.31yen , shaving its weekly loss to 0.5 percent. The sterling was down 0.2 percent at $1.5738, leaving it with a weekly gain of 1.8 percent. The Aussie dollar fell 0.5 percent to US $0.8038 after hitting a near four-month high of US $0.8164 on Thursday.
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