Dollar broadly higher vs. rivals in cautious trade

The U.S. dollar was broadly higher against the other major currencies on Friday, as market sentiment weakened after disappointing euro zone data, while investors eyed key U.S. budget talks later in the day. 

During European morning trade, the dollar was lower against the euro, with EUR/USD shedding 0.22% to 1.3028. 

The euro came under pressure after preliminary data showed that consumer price inflation in the euro zone ticked down to a annualized rate of 1.8% in February, from a rate of 2.0% the previous month. 

A separate report showed that the unemployment rate rose to a new record high of 11.9% in January from 11.8% the previous month. Analysts had expected the rate to remain unchanged at 11.8% in January. 

Earlier Friday, Markit research group said that Spain's manufacturing purchasing managers' index improved to 46.8 in February from 46.1 the previous month, beating expectations for a rise to 46.5, while Italy's manufacturing PMI fell to 45.8 last month from 47.8 in January, compared to expectations for a reading of 47.6. 

In addition, official data showed that German retail sales rose 3.1% in January, beating expectations for a 1% increase, after a 2.1% decline the previous month. 

The greenback was also higher against the pound, with GBP/USDdropping 0.89% to 1.5028. 

The pound dropped to 31-month lows against the greenback after Markit said that the U.K. manufacturing PMI deteriorated unexpectedly in February, falling to 47.9 from a reading of 50.8 the previous month, re-entering contraction territory for the first time since December. 

Analysts had expected the index to rise to 51.0 last month. 

In a separate report, the Bank of England said that net lending to individuals fell to GBP0.6 billion in January, from GBP1.8 billion the previous month, exceeding expectations for a decline to GBP1.1 billion. 

Elsewhere, the greenback was higher against the yen and the Swiss franc, with USD/JPY advancing 0.37% to trade at 92.90, and withUSD/CHF rising 0.38% to 0.9401. 

In Switzerland, data showed that the SVME PMI fell to 50.8 in February from a reading of 52.5 the previous month, compared to expectations for a reading of 52.2. 

The greenback was higher against its Canadian, Australian and New Zealand counterparts, with USD/CAD edging up 0.14% to 1.0321,AUD/USD slipping 0.18% to 1.0196 and NZD/USD falling 0.10% to 0.8240.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.32% to 82.25. 

Markets were also jittery as automatic spending cuts in the U.S. worth USD85 billion were due to be introduced on Friday after U.S. lawmakers failed to reach a deal to avert them. 

U.S. President Barack Obama invited congressional leaders to the White House for last minute negotiations before the 11.59pm deadline. 

Later in the day, the U.S. was to release a report from the Institute of Supply Management on manufacturing activity, official data on personal spending and revised data on consumer sentiment from the University of Michigan.

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