U.S. Markets

Dollar hurt by lower oil, soft U.S. consumer sentiment

NEW YORK (Reuters) - The dollar fell broadly on Friday as a slide in oil prices ahead of weekend talks among producers in Doha and a soft U.S. consumer sentiment report capped risk appetite and spurred investors to buy safe-haven currencies such as the yen.

Arrangement of various world currencies including Chinese Yuan, Japanese Yen, US Dollar, Euro, British Pound, Swiss Franc and Russian Ruble pictured in Warsaw January 26, 2011. REUTERS/Kacper Pempel

The dollar index, tracking the greenback’s value against six currencies, posted losses after two straight days of gains. The U.S. currency’s fall versus the yen was the largest daily loss in more than a week.

“There’s probably some anxiety about the Doha talks,” said Shaun Osborne, chief currency strategist at Scotiabank in Toronto.

Oil producers led by top exporters Saudi Arabia and Russia will meet in Doha, Qatar on Sunday to discuss freezing output at current levels to contain an oil glut. It would be the first coordinated action by major OPEC and non-OPEC producers in 15 years.

U.S. crude futures were down 2.8 percent at $40.34 per barrel CLc1.

“I think the fact that oil producers are talking suggests the psychology of the market has changed a little bit and probably the worst of the oil price declines is behind us. This would be good for risk sentiment going forward,” Osborne said.

An underwhelming U.S. consumer sentiment report on Friday also weighed on the dollar and dampened tolerance for risk. The University of Michigan survey of consumer sentiment showed a preliminary reading of 89.7 for April, compared with a forecast of 92.

In late trading, the dollar index .DXY slid 0.2 percent to 94.683. For the week though, it ended on a positive note with a 0.5 percent rise.

Against the yen, the greenback fell 0.6 percent to 108.72 yen JPY=, its biggest daily loss since April 7. The dollar so far this year is down nearly 10 percent versus the yen, on track for its worst year since 2010.

Danske Bank in a research note said it believes that given soft Japanese data and wage negotiations pointing to slowing growth, the Bank of Japan may have to take action at its April meeting. It is looking for the BoJ to cut interest rates deeper into negative territory, by 20 basis points to -0.3 percent.

“This is more than the market is pricing in and we believe this would stabilize dollar/yen and expect it to recover gradually,” Danske Bank said.

The euro rose 0.2 percent to $1.1284 EUR=, rising after three consecutive days of losses.

Reporting by Gertrude Chavez-Dreyfuss; Editing by Dan Grebler and James Dalgleish