LONDON (MarketWatch) -- The U.S. dollar and Japanese yen were mostly higher against major counterparts Friday, receiving a boost as weaker equity markets signaled renewed risk aversion, strategists said.
The euro declined 0.9% against the greenback to $1.2777. The single currency lost 0.9% against the Japanese unit to 121.73 yen.
The dollar was little changed versus the Japanese currency at 95.31 yen.
The British pound slipped 0.3% against the dollar to $1.5347. The euro slipped 0.7% against sterling to 83.18 pence.
European stocks were on the defensive Friday and U.S. stock index futures were mostly lower. See Europe Markets. Read Indications.
The euro posted little immediate reaction to a much larger-than-expected slowdown in the pace of consumer inflation across the 15-nation euro zone in November.
In a preliminary estimate, the statistical agency Eurostat said the annual rate of inflation slowed to 2.1% from a rate of 3.2%. Economists were expecting a more modest decline.
The data leaves annual inflation only a shade above the European Central Bank's target of near but just below 2%, and indicates inflation could hit the target by the end of the year - well ahead of the ECB's own projections, economists said. See full story.
The euro held onto small losses versus the dollar in the immediate wake of the data, but then edged down to make new lows for the day.
"The bottom line from the ECB is they will cut rates next week," said Kenneth Broux, an economist at Lloyds TSB.
Although the data signals the ECB has plenty of room to cut quite aggressively, the central bank's governing council is likely to drop the key lending rate by half a percentage point, or 50 basis points, to 2.75% from 3.25% when its Governing Council meets on Thursday, Broux said.
But economists said a bigger move isn't out of the question, particularly since ECB President Jean-Claude Trichet noted that policymakers had pondered a 75 basis point reduction at their last meeting before settling on a 50 basis point easing.
India's rupee fell sharply Friday, losing 1.5% against the greenback to trade at 50.02 to the dollar. The currency lost 1.7% against the European single currency to trade at 63.991 to the euro.
Indian foreign-exchange and other markets were closed Thursday amid terror attacks in Mumbai.
