* Dollar up on view that U.S. will be first to halt stimulus
* U.S. consumer sentiment slipped in July
* U.S. inflation data shows increase in price pressures
* Higher Portuguese bond yields weigh on euro
By Julie Haviv
NEW YORK, July 12 The dollar rose broadly on
Friday as investors bought back the currency in the wake of a
steep selloff, confident that the U.S. Federal Reserve will be
the first major central bank to step away from ultra-loose
Investors had aggressively shed long dollar bets after U.S.
Fed Chairman Ben Bernanke cast doubts on Wednesday over when the
central bank will start slowing its asset-purchase program. That
reversal caused the dollar to retreat from a three-year high
against a basket of six currencies reached earlier in the week.
Bernanke's comments, however, did not change the market's
overwhelmingly bullish stance towards the dollar.
While the Fed's bond-buying program is largely deemed as
negative for the dollar because it is viewed as tantamount to
printing money, the U.S. economy is on a much firmer footing
than most of the euro zone, Japan and Britain.
The ECB, the Bank of England and the Bank of Japan are all
looking to ease monetary policy further. On the other hand, an
outperforming U.S. economy should support expectations that the
Fed will be the first to pare some of its stimulus this year.
"There is some argument for suggesting that the shock effect
of a dovish Bernanke has largely been digested," said Alan
Ruskin, global head of foreign exchange strategy at Deutsche
Bank in New York.
"Even if he tries to avoid changing his tone, any policy
surprises are more likely to be in a positive dollar direction
than the reverse," he said.
Bernanke said on Wednesday that a highly accommodative
monetary policy would be needed for the foreseeable future,
pouring cold water on investor expectations that the Fed would
start unwinding its stimulus program in September.
Nevertheless, worries about rising interest rates and
falling stock prices hit U.S. consumer sentiment in early July,
while other data showed a firm rise in wholesale prices that
could make the U.S. Federal Reserve more comfortable reducing
its monetary stimulus.
In late-morning New York trade, the dollar index rose
0.3 percent to 83.019, although it was still down for the week.
Against the yen, the dollar was up 0.4 percent at 99.34
"We are still structurally bullish dollar across a range of
currencies, including the euro and sterling," said Chris Walker,
a currency strategist at Barclays in London.
The dollar had previously gained in sync with rising U.S.
Treasury debt yields and widening interest-rate differentials.
Treasury yields, which move inversely to price, have fallen in
recent days as Bernanke's comments caused investors to reassess
the central bank's plans for its bond-buying program.
"What we saw this week was a washout of long dollar
positions, but also a realization that Fed tightening is still
some way out. It's tapering of stimulus that will come first,"
said Walker, adding that high-yielding currencies such as the
Australian dollar would lose more ground in coming weeks.
Traders are also cautious about the commodity-linked Aussie
before the release of China's growth data on Monday.
The Australian dollar was down 1.4 percent at $0.9058.
Analysts' forecasts point to China's economic growth slowing
modestly to an annual rate of 7.5 percent in the second quarter
, but many economists see downside risks after a run of
Solid U.S. retail sales and housing data, scheduled for
release next week, would once again highlight the divergence in
growth between the United States and its peers - the euro zone,
Britain and Japan.
One of the ECB's top policymakers, Peter Praet, said the
bank will keep interest rates at current levels or cut them even
further, as long as inflation remains moderate.
The euro, meanwhile, pared losses versus the dollar as
Portuguese bond yields came off their session highs.
Yields climbed after Lisbon delayed its creditors' next review
of the country's bailout because of a political crisis.
Against the dollar, the euro was last down 0.4 percent at
$1.3048 after earlier falling as low as $1.2998,
according to Reuters data.