By Saikat Chatterjee and Sinéad Carew

LONDON/NEW YORK (Reuters) – The U.S. dollar lost some ground on Friday as high inflation wreaked havoc on consumer sentiment, but the greenback was on track for its third straight weekly gain after a surprisingly strong U.S. inflation print shocked markets on Wednesday, prompting investors to advance their bets for a U.S rate hike.

The dollar turned red on Friday morning after the University of Michigan survey showed a plunge in U.S. consumer sentiment in early November to its lowest level in a decade as surging inflation cut into households’ living standards, with few believing policymakers are taking sufficient steps to mitigate the issue.

With short-dated U.S. Treasury yields edging higher — five-year bond yields rose to a February 2020 high — investors were ramping up bets this week that U.S. policymakers will be forced to raise interest rates sooner rather than later. [US/]

Against a basket of its rivals, at 10:41 a.m. EST (1541 GMT) the dollar index was down 0.06% at 95.0960 after falling as low as 94.991 after the consumer sentiment news. Earlier in the session it had risen to its highest level since July 2020.

“Consumers are clearly more worried about real income growth as inflation outpaces wages for now, and that is weighing on sentiment,” said Erik Nelson, macro strategist at Wells Fargo.

“That is feeding into growth worries for the dollar and pushing it lower against most currencies, especially the Japanese yen as U.S. yields decline here.”

The dollar was down 0.16% at 113.87 yen after falling as low as 113.77.

Currency markets have been shaken up since Wednesday when data showed a broad-based rise in U.S. consumer prices last month at the fastest annual pace since 1990, casting doubts on the Federal Reserve’s contention that price pressures will be transitory.

The renewed strength in the dollar earlier during the week had injected fresh life into the moribund currency volatility markets, as traders have scrambled to buy options to protect themselves against further dollar strength. A currency volatility index hit a fresh six-month high on Friday.

Markets were pricing a first rate increase by July and a high likelihood of another by November. CME data is assigning a 50% probability of a rate hike by then, compared with less than 30% a month earlier.

The euro was down 0.03% at $1.1446 after falling earlier to an almost 16-month low at $1.1433.

Investors have become increasingly bearish on the outlook for the single currency as the European Central Bank appears unlikely to change its extremely dovish policy settings in the near term against a backdrop of a slowing economy.

Sterling bulls received a slight reprieve on Friday as GBP/USD rebounded after hitting a fresh 2021 low, though the rise may only offer temporary solace as technical and fundamental factors pointed to further declines.

Stering was last up 0.33% against the dollar. It had gained ground in late morning as the dollar weakened and after the European Union said it was committed to coming to an agreement with the UK regarding Northern Ireland.

The risk-sensitive Australian dollar was up 0.37% at $0.7318 after earlier sinking as low as $0.7277 for the first time in more than a month.

In cryptocurrencies, bitcoin was down 2.3% at $63,324.12 after briefly hitting a record high of $69,000 earlier in the week.

========================================================

Currency bid prices at 10:41AM (1541 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 95.0960 95.1630 -0.06% 5.685% +95.2660 +94.9910

Euro/Dollar $1.1446 $1.1450 -0.03% -6.32% +$1.1462 +$1.1433

Dollar/Yen 113.8700 114.0600 -0.16% +10.21% +114.3000 +113.7700

Euro/Yen 130.32 130.58 -0.20% +2.68% +130.7600 +130.2400

Dollar/Swiss 0.9218 0.9210 +0.11% +4.22% +0.9238 +0.9207

Sterling/Dollar $1.3406 $1.3363 +0.33% -1.87% +$1.3424 +$1.3354

Dollar/Canadian 1.2556 1.2582 -0.21% -1.40% +1.2604 +1.2547

Aussie/Dollar $0.7318 $0.7291 +0.37% -4.87% +$0.7321 +$0.7277

Euro/Swiss 1.0549 1.0544 +0.05% -2.39% +1.0572 +1.0544

Euro/Sterling 0.8535 0.8560 -0.29% -4.50% +0.8568 +0.8535

NZ $0.7040 $0.7022 +0.23% -1.99% +$0.7041 +$0.6997

Dollar/Dollar

Dollar/Norway 8.6840 8.6805 +0.16% +1.25% +8.7085 +8.6775

Euro/Norway 9.9420 9.9347 +0.07% -5.02% +9.9611 +9.9230

Dollar/Sweden 8.7431 8.6959 +0.29% +6.67% +8.7586 +8.6918

Euro/Sweden 10.0070 9.9776 +0.29% -0.69% +10.0166 +9.9703

(Reporting by Sinéad Carew in New York, Saikat Chatterjee in London, Kevin Buckland in Tokyo; Editing by Jonathan Oatis)

By Saikat Chatterjee and Sinéad Carew

LONDON/NEW YORK (Reuters) – The U.S. dollar lost some ground on Friday as high inflation wreaked havoc on consumer sentiment, but the greenback was on track for its third straight weekly gain after a surprisingly strong U.S. inflation print shocked markets on Wednesday, prompting investors to advance their bets for a U.S rate hike.

The dollar turned red on Friday morning after the University of Michigan survey showed a plunge in U.S. consumer sentiment in early November to its lowest level in a decade as surging inflation cut into households’ living standards, with few believing policymakers are taking sufficient steps to mitigate the issue.

With short-dated U.S. Treasury yields edging higher — five-year bond yields rose to a February 2020 high — investors were ramping up bets this week that U.S. policymakers will be forced to raise interest rates sooner rather than later. [US/]

Against a basket of its rivals, at 10:41 a.m. EST (1541 GMT) the dollar index was down 0.06% at 95.0960 after falling as low as 94.991 after the consumer sentiment news. Earlier in the session it had risen to its highest level since July 2020.

“Consumers are clearly more worried about real income growth as inflation outpaces wages for now, and that is weighing on sentiment,” said Erik Nelson, macro strategist at Wells Fargo.

“That is feeding into growth worries for the dollar and pushing it lower against most currencies, especially the Japanese yen as U.S. yields decline here.”

The dollar was down 0.16% at 113.87 yen after falling as low as 113.77.

Currency markets have been shaken up since Wednesday when data showed a broad-based rise in U.S. consumer prices last month at the fastest annual pace since 1990, casting doubts on the Federal Reserve’s contention that price pressures will be transitory.

The renewed strength in the dollar earlier during the week had injected fresh life into the moribund currency volatility markets, as traders have scrambled to buy options to protect themselves against further dollar strength. A currency volatility index hit a fresh six-month high on Friday.

Markets were pricing a first rate increase by July and a high likelihood of another by November. CME data is assigning a 50% probability of a rate hike by then, compared with less than 30% a month earlier.

The euro was down 0.03% at $1.1446 after falling earlier to an almost 16-month low at $1.1433.

Investors have become increasingly bearish on the outlook for the single currency as the European Central Bank appears unlikely to change its extremely dovish policy settings in the near term against a backdrop of a slowing economy.

Sterling bulls received a slight reprieve on Friday as GBP/USD rebounded after hitting a fresh 2021 low, though the rise may only offer temporary solace as technical and fundamental factors pointed to further declines.

Stering was last up 0.33% against the dollar. It had gained ground in late morning as the dollar weakened and after the European Union said it was committed to coming to an agreement with the UK regarding Northern Ireland.

The risk-sensitive Australian dollar was up 0.37% at $0.7318 after earlier sinking as low as $0.7277 for the first time in more than a month.

In cryptocurrencies, bitcoin was down 2.3% at $63,324.12 after briefly hitting a record high of $69,000 earlier in the week.

========================================================

Currency bid prices at 10:41AM (1541 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 95.0960 95.1630 -0.06% 5.685% +95.2660 +94.9910

Euro/Dollar $1.1446 $1.1450 -0.03% -6.32% +$1.1462 +$1.1433

Dollar/Yen 113.8700 114.0600 -0.16% +10.21% +114.3000 +113.7700

Euro/Yen 130.32 130.58 -0.20% +2.68% +130.7600 +130.2400

Dollar/Swiss 0.9218 0.9210 +0.11% +4.22% +0.9238 +0.9207

Sterling/Dollar $1.3406 $1.3363 +0.33% -1.87% +$1.3424 +$1.3354

Dollar/Canadian 1.2556 1.2582 -0.21% -1.40% +1.2604 +1.2547

Aussie/Dollar $0.7318 $0.7291 +0.37% -4.87% +$0.7321 +$0.7277

Euro/Swiss 1.0549 1.0544 +0.05% -2.39% +1.0572 +1.0544

Euro/Sterling 0.8535 0.8560 -0.29% -4.50% +0.8568 +0.8535

NZ $0.7040 $0.7022 +0.23% -1.99% +$0.7041 +$0.6997

Dollar/Dollar

Dollar/Norway 8.6840 8.6805 +0.16% +1.25% +8.7085 +8.6775

Euro/Norway 9.9420 9.9347 +0.07% -5.02% +9.9611 +9.9230

Dollar/Sweden 8.7431 8.6959 +0.29% +6.67% +8.7586 +8.6918

Euro/Sweden 10.0070 9.9776 +0.29% -0.69% +10.0166 +9.9703

(Reporting by Sinéad Carew in New York, Saikat Chatterjee in London, Kevin Buckland in Tokyo; Editing by Jonathan Oatis)