Dollar higher but still set for biggest weekly loss since May



* Dollar index down 0.8% for the week

* U.S. consumer spending rises strongly in June

By Saqib Iqbal Ahmed and Ritvik Carvalho

NEW YORK, July 30 (Reuters) - The dollar rose on Friday as upbeat economic data helped reverse some of the losses from earlier this week when dovish remarks by the Federal Reserve scuttled a month-long rally in the U.S. currency.

The dollar also got a lift after St. Louis Federal Reserve President James Bullard said the Fed should start reducing its $120 billion in monthly bond purchases this fall and cut them "fairly rapidly" so the program ends in the first months of 2022 to pave the way for a rate increase that year if needed.

The dollar index =USD , which measures the greenback against a basket of six currencies, was 0.3% higher at 92.113. The index was down 0.8% for the week, on pace for its worst weekly performance since the first week of May.

The greenback's downtrend began after Fed Chair Jerome Powell tripped up dollar bulls following a policy meeting this week by saying that rate increases were "a ways away" and the job market still had "some ground to cover."

"While the dollar suffered a notable setback this week, how significant it could prove may be gleaned by nonfarm payrolls next week," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.

The dollar found some support on Friday after data showed U.S. consumer spending rose more than expected in June as COVID-19 vaccinations boosted demand for travel-related services and recreation, even though part of the increase reflected higher prices, with annual inflation accelerating further above the Federal Reserve's 2% target.

The euro was 0.2% lower against the greenback but near a 1-month high after data showed the euro zone economy grew more quickly than expected in the second quarter, pulling out of a recession caused by the pandemic, while inflation shot past the European Central Bank's 2% target in July.

Meanwhile, the Chinese yuan CNH= had recovered all of its losses from Tuesday's plunge to trade at 6.4631 per dollar.

Sentiment was helped by China's attempt to calm frayed investor nerves by telling foreign brokerages not to "over-interpret" its latest regulatory actions.

With investors shying away from riskier assets, both the Australian AUD=D3 and New Zealand NZD=D3 dollars were down on the day but remained near two-week highs.

Sterling hovered close to a one-month high versus the dollar and was on course for its strongest week since December ahead of a Bank of England meeting next week.

Bitcoin BTC=BTSP was down about 3%, slipping well below $40,000, a level the cryptocurrency has not closed above since mid-June.



World FX rates Link
Dollar index set for worst week since May Link



Reporting by Saqib Iqbal Ahmed and Ritvik Carvalho;
Additional reporting by Swati Pandey in Sydney; Editing by
William Maclean, Tomasz Janowski, Frances Kerry and Dan Grebler

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