RTTNews - The dollar finished a choppy week in typical fashion Friday, bouncing back from early weakness after another round of troubling economic data fueled renewed risk aversion.

This marks the second day in a row that disappointing data signaled equities and riskier assets may have gotten ahead of any economic recovery. With a V-shaped recovery no longer a slam dunk, stocks fell sharply on Friday, giving the safe haven buck a big boost.

Reuters and the University of Michigan released their preliminary report on consumer sentiment in the month of August, showing that their consumer sentiment index unexpectedly decreased compared to the previous month.

The report showed that the consumer sentiment index fell to a reading of 63.2 in August from a reading of 66.0 in July. The decrease surprised economists, who had been expecting the index to increase to 69.0.

Last week, the dollar hit 2009 lows versus higher yielding counterparts, as many went all-in on the prospect of a global economic rebound.

Today's data all but ensures the dollar will not test those levels until a sunnier batch of economic data emerges, or stocks shrug off the worrying news and extend the summer rally.

The dollar firmed up a bit versus the euro on Friday, edging higher by a cent from its early lows to 1.4220. Earlier in August, the dollar hit an 8-month low of 1.4446.

Eurozone consumer prices declined at the fastest pace on record in July. However, the slower-than-expected economic contraction in the second quarter allayed fears of deflation and suggests that inflation will soon turn positive.

Eurostat revised the annual decline in consumer prices for July to 0.7% from the flash estimate of 0.6%.

Meanwhile, the dollar was stable versus the sterling, holding near 1.6530. While its been a rough summer, the dollar has managed to stabilize since hitting a 10-month low of 1.7012 earlier this month.

With commodity prices pulling back sharply, the dollar jumped versus the resource-linked loonie, bouncing back to $C1.0950. A week ago, the dollar seemed on its way to parity with the loonie, but bottomed out at a 10-month low of C$1.0630.

Against the yen, the dollar was hurt by the carry trade, slipping to a 10-day low of 94.50. On a longer term basis, the pair has been dancing around the mid-90's, with neither currency in great demand due to the stock rally.

The Bank of Japan might be required to extend its special funding measures after December if the economic situation fails to improve sufficiently in the bank's judgement, the minutes of the meeting held on July 14 and 15 showed Friday.

Back in the US, consumer prices were unchanged in the month of July, according to a report released by the Labor Department on Friday, with decreases in food and energy prices offsetting higher prices for apparel and tobacco.

Business inventories fell by more than expected in the month of June, according to a report released by the Commerce Department on Thursday, although the report also showed a notable increase in business sales during the month.

The report showed that business inventories fell 1.1 percent in June followed a revised 1.2 percent decrease in May.

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