By Myra P. Saefong and V. Phani Kumar, MarketWatch
SAN FRANCISCO (MarketWatch) — The dollar further scaled back some of its recent gains Friday on the heels of an advance in U.S. stocks, while the euro posted modest gains, holding above the key $1.30 level.
“The U.S. dollar continued to lose ground on Friday as market sentiment firmed up, but the recent weakness in the greenback is likely to be short-lived as the fundamental outlook for the world’s largest economy improves,” said David Song, currency analyst at DailyFX, in an emailed note.
The U.S. dollar index DXY -0.11% , a gauge of the currency’s performance against six major global counterparts, slipped to 80.180 from 80.292 in North America late Thursday.
The index was around 2% higher from the 78.622 level it traded at late last Friday.
U.S. stocks began higher Friday after a report showed the cost of living held flat in November. The Dow Jones Industrial Average DJIA +0.70% was last up 0.8%. Read more on U.S. stock action.
Prices paid by U.S. consumers for a broad range of goods and services were unchanged on a seasonally adjusted basis in November, according to the Labor Department Friday, while the core rate of inflation rose 0.2%. Read more about on the CPI.
“Although the headline reading for U.S. inflation fell back to an annualized rate of 3.4% in November from 3.5% in the previous, core consumer prices unexpectedly advanced at the fastest pace since October 2008,” said Song.
“The stickiness in price growth dampens the [Federal Open Market Committee’s] scope to expand monetary policy further as Fed officials see the recovery gathering pace in the following year,” he said. And “as market participants scale back expectations for another large-scale asset purchase program, the bullish sentiment underlining the greenback should gather pace over the remainder of the year.”
Among major currencies, the euro EURUSD +0.20% rose to $1.3030 from $1.3022. The shared currency was around 2.5% below the level it traded at a week ago.
The British pound GBPUSD +0.03% climbed to $1.5522 from $1.5512. Against the Japanese unit, the dollar USDJPY -0.08% was fetching 77.80 yen, compared with ÂĄ77.90.
Foreign exchange strategists at Societe Generale said the euro zone situation was now a “chronic, rather than an acute crisis,” after repeated failures to resolve the issue.
“The crisis should gradually have less global impact, as we can already see from falling volatility levels in rates, equities and even [forex]. This makes buying currencies which had nothing to do with the euro crisis but suffered from risk aversion nonetheless, a viable strategy for 2012,” the strategists wrote to clients in a weekly report.
Meanwhile, the Indian rupee and Indonesian rupiah advanced versus the greenback. Asian stocks were mostly higher Friday. Read Asia Markets.
The U.S. dollar USDINR -1.19% was fetching 52.88 Indian rupees, down Thursday’s record high of 54.29 rupees.
The Reserve Bank of India on Thursday announced measures aimed at preventing a further weakness in the Indian rupee, one of the biggest losers among emerging nation currencies this year. Read RBI preview.
The dollar weakened against the Indonesian currency USDIDR -0.74% , fetching 9,035 rupiah from 9,150 rupiah, after Fitch Thursday upgraded the country’s foreign- and local-currency issuer default ratings, with a stable outlook.
