NEW YORK, May 14: 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 fueled 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 per cent down from late Thursday.

Sterling fell below $1.8500, and traded around that level late in New York, down 0.7 per cent on the day, while the Australian dollar was down 0.6 per cent at $0.7606.

The greenback was up 0.6 per cent at 1.2245 Swiss francs and up over 1 per cent 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.

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. —Reuters