(Updates prices, adds commentary, adds NEW YORK dateline)
The dollar gained slightly on Friday and remained on track for its largest weekly gain in a month as investors continued to make bets on the U.S. Federal Reserve's interest rate hiking path.
The U.S. currency gained against the euro but fell against the yen and the pound, which edged higher after a volatile session on Thursday in the wake of Britain's budget, which included tax increases and spending cuts.
In the United States on Thursday, investors had reacted to hawkish policy maker comments with St. Louis Fed President James Bullard saying that even under a "generous" analysis of monetary policy, the Fed needs to keep raising rates as its tightening so far "had only limited effects on observed inflation."
The euro EUR=EBS was down 0.1% against the dollar at $1.0351 after earlier rising as much as 0.29%. The pound GBP=D3 pared gains against the greenback and was last up 0.36% after rising as much as 0.70% earlier.
Both the euro and sterling had hit multi-month highs against the dollar earlier this week after inflation data showed an easing in U.S. price pressures. But IG strategist Josh Mahony sees inflation optimism as somewhat misplaced.
"This perception that 'everything is all right now', because we've seen U.S. inflation is starting to turn lower, really does ignore the fact that U.S. inflation is at 7.7%, UK and euro zone inflation (rates) are in double digits and there are question marks on how long this decline will happen in terms of U.S. inflation," Mahony said.
"The shift in the dollar comes when we see the Federal Reserve start to prepare to cut rates, and that's going to be some way away yet."
In international politics, an explosion in Poland had created market volatility earlier in the week. And Ukraine's Prime Minister Denys Shmyhal said on Friday that Russian missile strikes had crippled almost half of Ukraine's energy system as heavy fighting raged in areas in the east and south.
A top diplomat said on Friday that Russia is open to more high-level talks with the United States, but the Kremlin dismissed the idea of a summit between President Vladimir Putin and U.S. President Joe Biden as "out of the question" for now.
With geopolitical news turning marginally positive during the week, Daniel Tenengauzer, head of markets strategy said this was a negative for the dollar. But he also attributed some recent trading to year-end positioning.
"Heading into Thanksgiving and the year-end, people have been closing out positions. The bias throughout the year has been to stay long the dollar," said Tenengauzer. But now, he said, "We're reaching a neutral positioning stance when it comes to the dollar."
Against the yen JPY=EBS , the dollar fell 0.2% to 139.88 yen. Still the dollar index .DXY , which measures the greenback against a basket of major currencies, was up 0.02% at 106.704.
The index was recently up about 0.385% week-to-date, representing a partial recouping of last week's 4% losses when U.S. inflation data triggered the index's sharpest weekly drop since March 2020.
Treasury yields were up for a second day in a row though they pared gains somewhat. Yields on the 10-year note US10YT=RR were last at 3.79% after rising to 3.83%.
Earlier this week, stronger than expected U.S. retail sales data also dented speculation about easing interest rate hikes.
Meanwhile, data on Friday showed British retail sales staged only a partial recovery in October, when inflation hit a 41-year high of 11.1%.
The Australian dollar AUD=D3 was down 0.22% to $0.6678, below a two-month high reached earlier this week.
The New Zealand dollar NZD=D3 , meanwhile, was up 0.29%. and headed for its fifth weekly gain, ahead of next week's central bank meeting, at which rates could rise by as much as 75 basis points. RBNZWATCH .
======================================================== Currency bid prices at 10:22AM (1522 GMT)Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change Session Euro/Dollar EUR=EBS $1.0351 $1.0365 -0.13% -8.95% +$1.0396 +$1.0327 Dollar/Yen JPY=EBS 139.8800 140.1800 -0.20% +21.52% +140.4950 +139.6300 Euro/Yen EURJPY= 144.79 145.29 -0.34% +11.10% +145.5500 +144.5600 Dollar/Swiss CHF=EBS 0.9527 0.9523 +0.10% +4.51% +0.9547 +0.9501 Sterling/Dollar GBP=D3 $1.1910 $1.1868 +0.36% -11.93% +$1.1950 +$1.1859 Dollar/Canadian CAD=D3 1.3387 1.3328 +0.45% +5.89% +1.3399 +1.3300 Aussie/Dollar AUD=D3 $0.6678 $0.6690 -0.22% -8.16% +$0.6730 +$0.6662 Euro/Swiss EURCHF= 0.9860 0.9866 -0.06% -4.91% +0.9890 +0.9848 Euro/Sterling EURGBP= 0.8690 0.8736 -0.53% +3.45% +0.8741 +0.8691 NZ NZD=D3 $0.6152 $0.6131 +0.29% -10.17% +$0.6206 +$0.6120 Dollar/DollarDollar/Norway NOK=D3 10.1830 10.1285 +0.56% +15.62% +10.1990 +10.0890 Euro/Norway EURNOK= 10.5414 10.4901 +0.49% +5.28% +10.5437 +10.4685 Dollar/Sweden SEK= 10.6084 10.6069 -0.14% +17.64% +10.6360 +10.5610 Euro/Sweden EURSEK= 10.9820 10.9969 -0.14% +7.31% +11.0115 +10.9664 <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ World FX rates https://tmsnrt.rs/2RBWI5E^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
