The US dollar traded mostly lower on Friday, touching a fresh seven-week low on the euro and a two-week low against the yen, as investors pared back expectations for aggressive moves higher in US interest rates.
The euro briefly topped US$1.22 before settling back at US$1.2189 dollars at 10pm GMT, against US$1.2168 late on Thursday in New York.
The dollar dipped to ¥115.89, from ¥116.88 on Thursday.
Both US industrial production and the University of Michigan consumer confidence figures came in slightly below expectations, providing further evidence that US interest rates were probably close to their peak.
The consumer sentiment index held at 86.7 in March, below the consensus forecast of Wall Street economists. US industrial output increased 0.7 percent last month.
"With a lack of inflationary pressure ... the market is likely to continue selling dollars near-term as expectations of future Fed hikes are pared back," Bank of New York currency analyst Michael Woolfolk said.
He referred to interest rate increases by the US Federal Reserve, which has pushed its base rate up to 4.5 percent in 14 quarter-point increments but may be close to ending its cycle of increases.
"The dollar is still under a lot of pressure versus the euro," said David Solin, a partner at Foreign Exchange Analytics. "The market moved away from the idea of two rate hikes to one and maybe a second."
An American Bankers Association panel of economists said it sees the fed funds rate moving no higher that 5 percent by mid-year.
"The balance of risk is shifting from inflation to slower growth," said Robert McGee, chairman of the panel and chief economist at US Trust Company.
"The full impact of the past year's tightening has yet to be felt, which should raise a caution flag for the Fed," McGee said.
Bear Stearns' Steve Barrow said the euro faced strong resistance at the 1.22 dollar mark and when it was unable to make a sustained break above that level it fell back a little, although he noted that the currencies had traded within a very tight range.
Although the US dollar has been fairly soft against European currencies, it has risen against the so-called commodity currencies -- the New Zealand, Australian and Canadian dollars.
Elsewhere, the yen was firmer, rising to two-week highs against the US dollar.
One side believed that such a significant change in policy is likely to cause the yen to make strong gains, while others believed the process of tightening interest rates would be so slow that in real terms it will barely be noticed.
In late New York trade, the dollar stood at 1.2893 Swiss francs from SF1.2898 on Thursday. The pound was marginally lower at US$1.7561 from US$1.7564 on Thursday.
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