RTTNews - The dollar continued its topsy turvy trading versus the euro and hit a five-month low against the yen on Friday amid lingering suspicions that the US government may launch a second stimulus package to prod the sluggish economy.

Another round of gloomy data released this morning gave further ammunition to those remaining pessimistic about the economy.

Consumer sentiment in the month of July has deteriorated by much more than anticipated, according to a report released by Reuters and the University of Michigan on Friday, with the decrease likely due in part to concerns about the labor market.

The report showed that the preliminary reading on the consumer sentiment index for July came in at 64.6 compared the final reading of 70.8 for June.

The dollar was holding up well before the dismal consumer news. German Chancellor Angela Merkel gave the buck a lift this morning, telling reporters at the G8 that China's idea of an artificial reserve currency is not yet of practical relevance in the near future.

Versus the euro, the dollar slipped back to 1.3970 by mid-day, having reached as high as 1.3880 in early dealing. The pair has shown little direction over the past month, with the dollar supported by speculation the euro zone economy will be slow to snap back.

The buck firmed up a bit versus the sterling, rising more than a penny from yesterday's levels to 1.6200. With the advance, the dollar moved back toward a monthly high of 1.5982 from earlier in the week.

Meanwhile, the dollar briefly touched a fresh 5-month low of 91.76 before stabilizing near 92.30. The dollar has weakened sharply of late versus the yen amid signs the Japanese economy may be in better shape than previously feared.

In more economic news from the US, the Commerce Department released a report on Friday showing that the trade deficit unexpectedly narrowed in the month of May.

The report showed that the trade deficit narrowed to $26.0 billion in May from a revised $28.8 billion in April. This marks the smallest trade deficit since November of 1999.

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