The dollar index (DXY00) on Friday rose by +0.08% and posted a new 2-1/2 month high. The dollar found support Friday from higher bond yields after the University of Michigan U.S. Aug inflation expectations unexpectedly rose, which is hawkish for Fed policy. Gains in the dollar were limited on dovish comments from Fed Chair Powell, who signaled a pause in Fed rate hikes when he said the Fed "will proceed carefully" on whether to hike again. Also, an unexpected downward revision to the University of Michigan U.S. Aug consumer sentiment index was bearish for the dollar.
U.S. economic news Friday was mixed for the dollar. On the bullish side, the University of Michigan U.S. 1-year inflation expectations for Aug rose to 3.5%, stronger than expectations of no change at 3.3%. Also, the 5-10-year inflation expectations rose to +3.0%, stronger than expectations of no change at 2.9%. On the negative side, the University of Michigan U.S. Aug consumer sentiment index was revised down by -1.7 to 69.5, weaker than expectations of no change at 71.2.
