By Chuck Mikolajczak
NEW YORK (Reuters) -The dollar strengthened on Friday after the latest round of economic data showed a rebound in import prices while consumer sentiment remained subdued as tariff worries jumped, putting it on pace for a fourth straight weekly advance.
The Labor Department said import prices gained 0.1% last month after dropping 0.4% in March as a jump in the cost of capital goods outweighed cheaper energy prices. Economists polled by Reuters had forecast import prices, which exclude tariffs, would decrease 0.4%.
The dollar began to strengthen after a separate reading from the University of Michigan Surveys of Consumers showed its Consumer Sentiment Index dropped to 50.8 this month, below the 53.4 estimate, from a final reading of 52.2 in April. In addition, the 12-month inflation expectations of consumers shot up to 7.3%, the highest level since November 1981, from 6.5%.
The greenback began the week with a surge of more than 1% on Monday after the United States and China announced a 90-day pause on most of the tariffs imposed on each other’s goods since early April, easing fears of a global recession, but had been trending lower throughout the week in part due to tepid economic data.
“There’s all this data, but the headlines are taking over,” said Juan Perez, director of trading at Monex USA in Washington.
“The issue with (trade) developments is that they’re just happening a whole lot faster, and the ongoing, never-ending lack of guidance for the future continues. Meanwhile, we’re looking at data that is not truly reflecting all of the anxiety that we’ve really been living through.”
The dollar index, which measures the greenback against a basket of currencies, rose 0.36% to 101.13, with the euro down 0.37% at $1.1146. The greenback is up about 0.7% on the week, which would mark its biggest weekly gain in about 2-1/2 months, while the euro is down 0.9% on the week, and on track for its biggest weekly decline since early February.
The greenback is still down nearly 3% since April 2, when U.S. President Donald Trump announced his spate of tariffs on countries around the globe.
“The very idea that trade is not getting away from turbulence continues to affect the long-term faith in the dollar,” said Perez.
Markets have dialed back expectations for rate cuts from the U.S. Federal Reserve this year as a result of the signs of easing trade tensions, pricing in a 67.1% chance for the first cut of at least 25 basis points (bps) at the central bank’s September meeting, according to LSEG data. The prior view was for a likely cut in July.
Recent comments from Fed officials have indicated the central bank needs more data to determine the impact of the tariff announcements on prices and the economy before adjusting policy.
Against the Japanese yen, the dollar strengthened 0.16% to 145.89. Japan’s economy shrank for the first time in a year and at a faster pace than expected, data for the March quarter showed on Friday.
The dollar is up 0.4% for the week against the yen.
Japanese Finance Minister Katsunobu Kato said he would seek to discuss foreign exchange issues with U.S. Treasury Secretary Scott Bessent on the understanding that excessive currency volatility is undesirable and hopes to meet with Bessent next week.
Sterling weakened 0.2% to $1.327 and is down 0.1% on the week.
(Reporting by Chuck Mikolajczak, additional reporting by Stefano Rebaudo;Editing by Andrew Cawthorne and Chizu Nomiyama)
