* Dollar rebounds, but on pace for weekly loss of 1.7 pct
* U.S. consumer sentiment slipped in July
* Fitch downgrades France rating on uncertain economic
By Wanfeng Zhou
NEW YORK, July 12 The U.S. dollar rebounded on
Friday but was headed for its biggest weekly loss in five weeks
as traders pushed back the timing of a reduction in stimulus by
the U.S. Federal Reserve.
The euro also came under pressure after Fitch cut France's
credit rating on an uncertain economic outlook amid the ongoing
euro zone crisis and the need for structural reform.
The dollar had a roller-coaster ride this week, initially
rising to three-week peaks as expectations built that the Fed
could start reducing stimulus as early as September, only to
fall sharply after Fed minutes and comments from Chairman Ben
Bernanke quashed those expectations.
Even as the timing of a Fed move was pushed back, traders
said the outlook for the dollar remains bullish because the
United States will still likely be the first major central bank
to step away from ultra-loose monetary policy.
"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.
Analysts said the U.S. economy is on a much firmer footing
than its major counterparts, making it more likely the Fed will
scale back its stimulus this year. In contrast, the European
Central Bank, the Bank of England and the Bank of Japan are all
looking to ease monetary policy further.
The Fed's bond-buying program is largely deemed as negative
for the dollar because it is tantamount to printing money and
dilates the value of the currency.
The dollar index, which measures the greenback versus
a basket of six currencies, rose 0.3 percent to 82.980, but
remains below a three-year peak of 84.753 reached on Tuesday.
On the week, the index was down 1.7 percent, the biggest
weekly loss since the week ended June 7.
Bernanke said on Wednesday that a highly accommodative
monetary policy would be needed for the foreseeable future
because of low inflation and weakness in the labor market.
Solid readings on U.S. retail sales and housing activity,
scheduled for release next week, could once again highlight the
divergence in growth between the United States and its peers -
the euro zone, Britain and Japan.
Friday's U.S. data painted a mixed picture of the economy ,
with consumer sentiment edging lower in early July, but a firm
rise in wholesale prices could make the Fed more comfortable
reducing its monetary stimulus.
The euro fell 0.3 percent to $1.3061, pulling back
from a near three-week high of $1.3201 set on Thursday.
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 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.
The dollar gained 0.5 percent to 99.39 yen.
On the week, the euro gained 1.8 percent against the dollar,
the best week since mid-January. The dollar lost 1.8 percent
versus the yen, the largest since mid-June.
Traders are also cautious about the commodity-linked Aussie
before the release of China's growth data on Monday.
The Australian dollar was down 1.5 percent at $0.9049.
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