The US dollar weakened and government bond yields fell to multi-week lows yesterday after a benign reading of US inflation in June and soft retail demand raised doubts the Federal Reserve would increase interest rates later this year.
The consumer price index was unchanged in June, while core prices, stripping out food and energy, edged up just 0.1%, the Labor Department reported on Friday.
Industrial production rose for the fifth straight month in June, increasing 0.4 percent on a continued rise in oil and gas drilling and coal mining. The core CPI increased 1.7 percent year-on-year after a similar gain in May.
Lower costs for gas, airline tickets, new and used cars and wireless mobile phone plans kept USA consumer prices flat in June, evidence that inflation remains muted.
In a separate report, the Commerce Department said retail sales fell 0.2 per cent last month, weighed down by declines in receipts at service stations, clothing stores and supermarkets.
Meanwhile, U.S. stock futures pointed to a mixed open.
The benchmark 10-year US Treasury note rose 6/32 in price to yield 2.3248 per cent.
The Australian dollar rose 0.4 percent to $0.7758, well on track to post its best weekly performance in four months.
U.S. interest rates futures rose as traders pared their view the Fed would increase rates again in 2017. The Russell 2000 index of smaller-company stocks inched up 0.1 percent to 1,425.66.
The Fed has raised rates twice this year and is expected to do so once more, though probably not until December.
Peter Boockvar, chief market analysts for the Lindsey Group, sees the central bank "backing off somewhat from hiking rates in September".
The annualized rate of inflation in several CPI components over the past three months showed declines of 4.9 per cent in apparel, 5.5 per cent in used cars and trucks and 4.1 per cent in professional services, said Heidi Learner, chief economist in NY for brokerage Savills Studley, a unit of Savills Plc. The dollar traded lower most of this year, after gaining sharply in the fourth quarter on expectations that President Donald Trump's election would lift the economy.
The New Zealand dollar another high-earning currency that has gained from significant risk appetite this week, shed 0.02 percent to 0.7318 after reaching an eight-month peak of 0.7369 on Thursday.
"Yellen has indicated after the June policy meeting, in the clearest way as possible by her standards, that she plans to start balance sheet reduction and there will be one more rate hike this year". It earlier fell to 2.279 percent, its lowest since June 30.
The Fed boss also cited growing concerns about weak underlying inflation, something that may deter the central bank from raising interest rates too quickly.
The most-active US gold futures for August delivery futures settled up $10.20, or 0.84 percent, at $1,227.50 per ounce. Oil prices rose 1 per cent.
Brent crude futures, the worldwide benchmark for oil, were up 31 cents at $48.73 per barrel.