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* Dollar index on pace for worst weekly decline this year
* Sterling steadies after losing week
By Saqib Iqbal Ahmed and Iain Withers
NEW YORK, April 9 (Reuters) - The dollar rose against a
basket of currencies on Friday, paring some of the week's
losses, as a stronger-than-expected rise in U.S. and China's
inflation gauges drove up bond yields.
The U.S. Dollar Currency Index =USD , which measures the
greenback against a basket of six currencies, was 0.156% higher
at 92.218.
"We're seeing a consolidation in the broad U.S. dollar today
after a week of losses as inflation data from China and the U.S.
sparks the U.S. treasury curve back into life," said Simon
Harvey, currency analyst at broker Monex Europe.
Data on Friday, showed U.S. producer prices increased more
than expected in March, resulting in the largest annual gain in
9-1/2 years, fitting in with expectations for higher inflation
as the economy reopens amid an improved public health
environment and massive government funding. Inflation is expected to heat up this year, driven by
pent-up demand and as the weak readings last spring drop out of
the calculation. Prices tumbled early in the pandemic amid
mandatory closures of non-essential businesses across many
states to slow the first wave of COVID-19 infections.
Most economists and Federal Reserve officials believe higher
inflation will be transitory because of labor market slack.
Earlier on Friday, data showed China's factory gate prices
beat analyst expectations and rose at their fastest annual pace
since July 2018 in March, the latest sign that a recovery in the
world's second-largest economy is gathering momentum.
The dollar was also helped by data showing a second straight
monthly drop in industrial production in Germany, further
boosting the likelihood of Europe's biggest economy having
contracted in the first quarter. Still, the dollar's rally this year appears to have run out
of steam. Despite Friday's gains, the dollar index was on pace
to finish the week down 0.8%, its worst weekly showing this
year.
"In short, the energy has gone out of the dollar's
first-quarter rebound, just as it has gone out of the bond
sell-off," said Kit Juckes, head of FX strategy at Societe
Generale.
Sterling steadied on Friday, having touched a two-month low
against the dollar in early London trading. It was still set for
its biggest weekly drop against the euro so far this year, hurt
by profit-taking after a strong first quarter. GBP=D3
The Australian dollar also fell as much as 0.9%, before
paring its losses. AUD=D3
Analysts at MUFG said in a note the move had no clear macro
trigger, but a financial stability report from Australia's
central bank indicating it would refrain from monetary policy
action to tackle growing lending risk may have pressured the
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World FX rates https://tmsnrt.rs/2RBWI5E
Dollar drop https://tmsnrt.rs/39SFkVx
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