- Upbeat Tokyo core inflation underpins yen
- Fed's preferred PCE inflation data awaited
- Dollar index set for fifth-straight monthly decline
SINGAPORE May 30 (Reuters) - The U.S. dollar wobbled on Friday, heading for its fifth-straight monthly decline as traders braced for further uncertainty around trade policy and U.S. fiscal health while awaiting pivotal inflation reports later in the day.
The greenback had a choppy week, ending lower in the previous session after a federal court temporarily reinstated the most sweeping of President Donald Trump's tariffs, just a day after another court had ordered an immediate block on them.
Trump on Thursday said he hoped the Supreme Court would overturn the trade court's decision, while officials also indicated that they could employ other presidential powers to ensure the tariffs take effect.
The uncertainty around tariffs has taken a vice-like grip on markets as investors flee U.S. assets looking for alternatives, worried that Trump's erratic policies could challenge the strength and outperformance of U.S. markets.
"The (court) decision marks the beginning of a new source of uncertainty rather than the total closure of another," said Kyle Rodda, senior financial market analyst at Capital.com, noting that the mood in the market was cautious.
On Friday, the euro was slightly firmer at $1.1378, ahead of German inflation data for May while the Swiss franc was little changed at 0.8225 per dollar.
The U.S. currency though was set for monthly declines against the Swiss franc, the euro and the pound .
Thursday's weekly jobless claims and economic growth data did little to placate worries of a U.S. economic downturn. Investor focus will be on the Federal Reserve's preferred inflation data - the personal consumption expenditure (PCE) report - later on Friday.
Worries about fiscal debt levels in developed economies, highlighted by weak appetite for freshly issued longer-dated credit in the U.S. and in Japan, have also weighed.
The dollar index , which tracks the U.S. unit against a basket of six other currencies, was 0.16% higher at 99.416. The index was set for a decline of 0.25% in May, its fifth straight month in the red.
On the flip side, markets have taken note of emerging market assets. An index tracking emerging market currencies has gained 2.2% for the month - its biggest one-month rise since November 2023
INFLATION WATCH
The Japanese yen firmed 0.3% to 143.80 per dollar after data showed underlying inflation in Tokyo hit a more than two-year high in May, keeping alive the chances of further interest rate hikes from the Bank of Japan.
"The BOJ is in a difficult position," said Min Joo Kang, senior economist at ING. "Inflationary pressures remain hot, while the economic recovery remains fragile -- and facing strong headwinds from US tariffs."
However, the yen is on track for its first monthly decline against the dollar this year.
Markets are also on the lookout for clues on highly anticipated trade deals as the Trump-mandated July 9 deadline on tariffs draws near.
The U.S. PCE data is likely to show that inflation rose 2.2% in April, according to economists polled by Reuters, compared with a 2.3% increase in March.
The Fed tracks the PCE price measures for its 2% inflation target. Economists are forecasting a surge in inflation this year as the Trump administration's import duties raise the cost of goods.
Yields on longer-dated U.S. and Japanese bonds have eased this week, but still remain close to multi-month highs. Benchmark 10-year Treasury yields were last steady at 4.426%.
Elsewhere, the Australian dollar eased slightly to $0.6431, while the New Zealand dollar was last bought at$0.5968.
Reporting by Johann M Cherian in Singapore; Editing by Sonali Paul and Rachna Uppal
Source: Reuters