FOREX-Dollar edges up as inflation data helps lift Treasury yields

* Dollar index on pace for worst weekly decline this year
* Sterling steadies after losing week

(Updates to U.S. afternoon)
By Saqib Iqbal Ahmed and Iain Withers
NEW YORK, April 9 (Reuters) - The dollar edged higher
against a basket of currencies on Friday, paring some of the
week's losses, as a stronger-than-expected rise in U.S. and
Chinese inflation gauges drove up bond yields.
The U.S. Dollar Currency Index =USD , which measures the
greenback against a basket of six currencies, was 0.10% higher
at 92.163.
"We're seeing a consolidation in the broad U.S. dollar today
after a week of losses as inflation data from China and the U.S.
sparks the U.S. treasury curve back into life," said Simon
Harvey, currency analyst at broker Monex Europe.
Data on Friday, showed U.S. producer prices increased more
than expected in March, resulting in the largest annual gain in
9-1/2 years, fitting in with expectations for higher inflation
as the economy reopens amid an improved public health
environment and massive government funding. Inflation is expected to heat up this year, driven by
pent-up demand and as the weak readings last spring drop out of
the calculation. Prices tumbled early in the pandemic amid
mandatory closures of non-essential businesses across many
states to slow the first wave of COVID-19 infections.
Most economists and Federal Reserve officials believe higher
inflation will be transitory because of labor market slack.
Earlier on Friday, data showed China's factory gate prices
beat analyst expectations and rose at their fastest annual pace
since July 2018 in March, the latest sign that a recovery in the
world's second-largest economy is gathering momentum.
The dollar was also helped by data showing a second straight
monthly drop in industrial production in Germany, further
boosting the likelihood of Europe's biggest economy having
contracted in the first quarter. Still, the dollar's rally this year appears to have run out
of steam. Despite Friday's gains, the dollar index was on pace
to finish the week down 0.9%, its worst weekly showing this
year.
"I guess this may only be a pause with the US dollar selling
likely to resume so long as the Fed's patient rhetoric remains
unchanged, especially this early in the anticipated inflation
cycle," Stephen Innes, chief global market strategist at Axi,
said in a note.
Sterling pared losses to trade little changed on the day
after having touched a two-month low against the dollar in early
London trading. It was still set for its biggest weekly drop
against the euro so far this year, hurt by profit-taking after a
strong first quarter. GBP=D3 The Australian dollar also fell as much as 0.9%, before
paring its losses. AUD=D3
Analysts at MUFG said in a note the move had no clear macro
trigger, but a financial stability report from Australia's
central bank indicating it would refrain from monetary policy
action to tackle growing lending risk may have pressured the
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World FX rates https://tmsnrt.rs/2RBWI5E
Dollar drop https://tmsnrt.rs/39SFkVx
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