Dollar edges higher on strong U.S. consumer sentiment data

The U.S. dollar edged higher against a basket of major currencies on Friday after strong data on U.S. consumer sentiment calmed nerves after a week of severe market volatility.

The Thomson Reuters/University of Michigan preliminary October reading on the overall index on consumer sentiment came in at 86.4, the highest since July 2007 and marking an unexpected gain.

"Obviously, some of the momentum in the economy is continuing, despite what Wall Street tells you," said Axel Merk, chief investment officer at Palo Alto, California-based Merk Investments. "The recent market volatility is definitely not reflected, and the glass is half-full again."

The data eased traders' concerns after worries surrounding the health of the global economy shook stocks, bonds and currencies markets this week. The dollar had gained against the euro, yen, and Swiss franc earlier in the session on greater stability in markets.

"With oil stabilizing and interest rates at least stabilizing and maybe heading up a bit from their lows, that's going to support the dollar," said Chris Gaffney, senior market strategist at EverBank Wealth Management in St. Louis.

Commerce Department data earlier in the session showing U.S. housing starts and permits rose in September had little impact on the dollar. Federal Reserve Chair Janet Yellen said Friday the growth of economic inequality in the United States "greatly" concerned her, but her comments had little impact on currency markets.

The euro EUR= was last down 0.26 percent against the dollar at $1.2776, just off a session low of $1.2755. The dollar was up 0.4 percent against the yen JPY= at 106.72 yen after earlier hitting a session high of 106.77 yen.

The dollar was up 0.25 percent against the Swiss franc CHF= to trade at 0.9448 franc after hitting a session high of 0.9466 franc. The dollar index .DXY, which measures the greenback against a basket of six major currencies, was up 0.17 percent at 85.101.

On Wall Street, U.S. stocks were higher following a batch of solid earnings reports, with the benchmark Standard & Poor's 500 .SPX stock index up 1.58 percent. U.S. Treasuries prices fell on the bounceback in Wall Street and European stock markets.