* 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 outlook
By Wanfeng Zhou
NEW YORK, July 12 (Reuters) - 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 disappointing data.