(fxcue news) - The U.S. dollar drifted lower on Friday, extending weakness from the previous session, amid bets the Federal Reserve might announce a larger interest-rate cut nex week, and also deliver a few more reductions in the coming months. In economic news today, the University of Michigan said its consumer sentiment index rose to 69.0 in September from 67.9 in August, while economists had expected the index to inch up to 68.0. The report also showed a continued decrease by year-ahead inflation expectations, which fell for the fourth consecutive month. Year-ahead inflation expectations edged down to 2.7% in September from 2.8% in August, hitting the lowest level since December 2020. The Labor Department also released a report before the start of trading showing import prices in the U.S. decreased by slightly more than expected in the month of August. Former New York Fed President Bill Dudley said a couple of days ago that there was a strong case for a 50 basis point reduction. CME Group's FedWatch Tool currently suggests rates will be lower by at least a full percentage point following the Fed's December meeting. The dollar index dropped to 100.88 in early New York session, but recovered to 101.11 as the day progressed, trimming down its loss to around 0.25%. Against the Euro, the dollar firmed to 1.1077 from a low of 1.1104. Against Pound Sterling, the dollar recovered to 1.3123 after having weakened to 1.3159 a unit of the British currency. The dollar was weak against the Japanese currency at 140.94 yen. The Aussie eased against the dollar to 0.6704 a unit. Against Swiss franc, the dollar weakened to CHF 0.8490 from CHF 0.8513, and against the Loonie, it gained marginally at C$ 1.3587.