Dollar higher after upbeat U.S. retail sales data

© Reuters. FILE PHOTO: A picture illustration shows U.S. 100-dollar bank notes taken in Tokyo August 2, 2011. REUTERS/Yuriko Nakao

By Saqib Iqbal Ahmed and Iain Withers

NEW YORK (Reuters) - The dollar edged higher on Friday, on track for a weekly gain and supported by upbeat retail sales data boosting expectations that economic growth accelerated in the second quarter.

The dollar index, which measures the greenback against a basket of six currencies, was 0.157% higher at 92.718. The index is on pace to log a gain of 0.6% this week, its biggest weekly rise in about a month.

U.S. retail sales unexpectedly increased in June as demand for goods remained strong even as spending was shifting back to services.

Graphic: U.S. retail sales and GDP: https://fingfx.thomsonreuters.com/gfx/mkt/ygdvzzxobvw/Pasted%20image%201626444234362.png

Solid U.S. data and a shift in interest rate expectations after the Federal Reserve flagged in June sooner-than-expected hikes in 2023 have helped lift the dollar in recent weeks and made investors nervous about shorting it.

Friday's gains for the dollar came despite Fed Chair Jerome Powell reiterating on Thursday that rising inflation was likely to be transitory and that the U.S. central bank would continue to support the economy.

"The data was consistent with the economy making substantial strides and cements expectations of very robust second quarter growth of around 10%," said Joe Manimbo, senior market analyst at Western Union (NYSE:WU) Business Solutions in Washington.

"A backdrop of rising inflation, falling unemployment and a resilient consumer makes a compelling case for the Fed to unwind stimulus," Manimbo said.

The New Zealand dollar gained 0.37% after data showed New Zealand's consumer prices rose far faster than expected, prompting some in the market to bet on a rate hike as soon as August..

Sterling edged lower against the dollar, heading for its worst week in a month, as investors sought safety in the greenback amid concerns over rising COVID-19 cases globally.

The Canadian dollar climbed 0.1% on Friday, helped by upbeat domestic wholesale trade data, a day after touching a near 3-month low against its U.S. counterpart.

Cryptocurrencies found support after recent turbulence, with bitcoin about flat on the day at $31,835.59.