The US dollar slumped this afternoon as inflation figures missed expectations, but stock markets rose to fresh highs.
US consumer prices rose the most in eight months in September due to a rise in gasoline prices following hurricane disruptions in the Gulf Coast.
The dollar index fell 0.25 per cent to 92.826 after the Labour Department said the consumer price index (CPI) rose 0.5 per cent last month after a 0.4 per cent rise in August as gasoline prices jumped 13.1 per cent. Analysts expected a 0.6 per cent rise.
Core consumer prices, which exclude food and energy, rose 1.7 per cent year-on-year in September, the same pace of the previous month.
"The tired dollar collapsed like a house of cards on Friday, after US CPI figures and retail sales for September failed to pack a punch," said Lukman Otunuga, research analyst at FXTM.
"Although US consumer prices rose 0.5 per cent, the largest increase seen in eight months on the back of rising gasoline prices, underlying inflation remained subdued."
Otunuga added that concerns of depressed inflation could cloud the prospect of higher US interest rates in 2018.
Retail sales bounce
Meanwhile, retail sales recorded their biggest rise in two and a half years, jumping 1.6 per cent.
The Commerce Department said the rise was due to hurricanes boosting demand for building materials and vehicles as well as higher gasoline prices.
US stocks started the day at fresh highs following the news.
At the time of writing, the S&P 500 was up 0.19 per cent at 2,555.68, the Nasdaq rose 0.37 per cent to 6,616.22 and the Dow Jones Industrial average climbed 0.25 per cent to 22,897.20.
"Although [the retail sales increase] was below market estimates, this figure is still encouraging and continues to support the bullish sentiment towards the US economy," Otunuga added.