The dollar climbed to fresh multi-month highs against the major currencies on Friday, extending its gains following a string of surprisingly strong US economic data over the past week. Above-consensus April job creation and retail sales, and a narrower-than-expected trade deficit in March have fuelled waves of dollar buying in recent session. The dollar hit a seven-month high against the euro and Canadian dollar on Friday, a six-month high against sterling, a four-month high against the Australian dollar and a three-month peak against the Swiss franc. This has lifted the dollar to levels that suggest it can strengthen further still. "There are increasing signs that the break higher in the dollar could have 'staying power,' with further dollar upside during the months ahead," wrote Robert Sinche, head of currency research at Bank of America, in a research note.
The euro fell to its lowest since mid-October at $1.2611, according to Reuters data. Late in New York trade it was at $1.2621, 0.4 percent down from late Thursday.
Sterling fell below $1.8500, and traded around that level late in New York, down 0.7 percent on the day, while the Australian dollar was down 0.6 percent at $0.7606.
The greenback was up 0.6 percent at 1.2245 Swiss francs and up over 1 percent against the Canadian dollar at C$1.2648.
The fact that the dollar is closing the week near these highs is a bullish sign for the currency, said Aziz McMahon, currency strategist at ABN Amro in New York.
"That's really positive ... and I'd say this is probably going to continue next week," he said.
The robust US economic data has cemented market expectations the Federal Reserve will continue raising interest rates to cool building inflationary pressures. Higher rates often burnish the allure of a currency.
Data released on Friday showed that US import prices rose 0.8 percent in April, double market forecasts as costs for imported oil and industrial supplies continued to advance in a potential risk to inflation. The report is an early inflation warning in the production chain that eventually shows up in consumer prices.
"That's going to keep the Fed very sensitive to inflationary pressures (and) should also pressure short-term rates, which should be dollar supportive," said T.J. Marta, senior currency strategist at RBC Capital Markets in New York.
US business inventories, meanwhile, were up 0.4 percent in March, slightly below market expectations, while sales grew 0.7 percent. Analysts say rising business inventories reflect growing business confidence, although they could also mean that sales have dropped and stocks have started to accumulate.
Also on Friday, preliminary data on the University of Michigan consumer sentiment index showed a drop in May to 85.3 from April's 87.7, according to market sources. The dollar weakened a bit after the report, but then resumed its gains.
Meanwhile, euro zone finance ministers highlighted their concern over the sluggishness of the region's economy. Italy for example has slid back into recession.
"We're seriously concerned by the situation," Luxembourg Prime Minister Jean-Claude Juncker told reporters after chairing talks between the 12 finance ministers.
Talk like this can only weigh on the euro, McMahon at ABN Amro said.
Highlighting the dollar's general glow recently, the currency's gains on Friday came amid another day of losses in the equity markets and falling bond yields. The yield on the 10-year Treasury note fell to a 3-month low of 4.11 percent. Next up for the dollar are capital flows data for March, which will be released on Monday by the US Treasury.
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