Dollar rises against the yen and euro after earlier weakness
The dollar reversed course during New York trading on Friday to rise against the euro and yen after a report showed U.S. consumers were less optimistic, prompting a rise in risk aversion.
The report indicated consumers, the backbone of the U.S. economy, were bracing for higher interest rates and slightly slower economic growth.
But that was just one undercurrent among many as investors continued to adjust positions amid a rise in U.S. Treasury yields on expectations the Federal Reserve may start withdrawing monetary stimulus as soon as next month.
While a cutback in stimulus is not a rise in official interest rates, investors are acting as if the rise in Treasury market yields is the equivalent. Higher U.S. yields would typically raise the attractiveness of dollar-denominated assets and boost the dollar.
Quantitative easing, or bond purchases by the Fed for its own balance sheet, was uncharted territory until the central bank launched the operation in a major policy shift to try to help stabilize the economy. Now, investors are concerned that rising yields may lead to a broader sell-off in U.S. assets.
"Without the U.S. consumer behind growth, the U.S. will struggle to have a stronger economy," said Michael Woolfolk, global market strategist at BNY Mellon in New York. "It's risk off."
The dollar index rose 0.13 percent to 81.281. The euro was 0.12 percent lower on the day at $1.3332 after earlier touching a one-week high, while against the yen, the dollar was 0.22 percent higher at 97.57. The dollar swung between a peak of 97.77 yen and a trough of 97.03 yen.