Dollar dented as consumer sentiment dives

NEW YORK (Aug 13) - The U.S. dollar fell to a one-week low against a basket of currencies on Friday, after a survey showed U.S. consumer sentiment dropped sharply in early August to its lowest level in a decade.

The University of Michigan said its preliminary consumer sentiment index fell to 70.2 in the first half of this month from a final reading of 81.2 in July. That was the lowest level since 2011 and one of the six largest drops in the past 50 years of the survey.

Investors this week have been treated to a mixed bag of data. While U.S. producer prices data out Thursday showed surging prices, bolstering the case for the Federal Reserve removing some of its stimulus, it followed U.S. consumer price data on Wednesday, which indicated inflation may be peaking, potentially giving the Fed room to remain accommodative for longer.

"The prime driver this week was this idea that a deceleration in inflation pressures will reduce the impetus for an earlier tapering of Federal Reserve asset purchases," said Karl Schamotta, chief market strategist at Cambridge Global Payments in Toronto.

"What's happened here is traders have moved their expectation for a tapering announcement from September toward November, perhaps even December," Schamotta said.

Reuters