The U.S. dollar was mostly flat against peer currencies on Friday after data showed a less-than-expected increase in inflation in January, suggesting the Federal Reserve could continue to hold rates steady in the near term. The Japanese yen was set for its strongest weekly gain in about 15 months. The Reuters Inside Track newsletter is your essential guide to the biggest events in global sport. Sign up here. U.S. Labor Department data on Friday showed that the consumer price index rose 0.2% last month compared with an estimate of 0.3% from economists polled by Reuters.
The euro was 0.02% higher at $1.1873 against the dollar, but was set to gain 0.5% this week. Against the Swiss franc , the dollar weakened 0.22% to 0.76785 and was on course for a weekly loss of 1%. The dollar's behavior reflects market positioning as it awaits fresh central bank signals on the direction of interest rates, said Olivier Bellemare, senior derivatives trader at Monex Canada in Montreal. MARKET REACTION IS 'TIMID' Earlier this week, data suggested the U.S. labor market was stabilizing with a drop in the U.S. unemployment rate amid strong jobs growth in January and a less-than-expected decrease in the number of Americans filing new applications for unemployment.
"The market reaction to the data was timid at best and the moves were mostly tactical," Bellemare said. The dollar index edged lower by 0.07% to 96.85, on track to shed 0.84% for the week. The dollar's relative weakness is partly driven by volatile U.S. policymaking in January, recent software sector selloff that has reduced U.S. equity market outperformance, and "idiosyncratic" developments in Asia, especially a steadily strengthening Chinese yuan, said Goldman Sachs analysts including Alexandra Kanter in an investor note. YEN'S STRONG PERFORMANCE The yen has dominated activity in the foreign exchange market this week, after Japanese Prime Minister Sanae Takaichi's historic election win allayed some investor worries about the government's finances. The yen was still headed for a gain of nearly 3% for the week, its largest rise since November 2024, and was up 0.08% on the day at 152.67.
