The U.S. dollar gained versus the euro amid worries about Greece's fiscal situation and refuted rumors that German Chancellor Angela Merkel was preparing to resign.
The U.S. currency held onto those gains and others against major currencies as reports showed tame inflation and improvements in manufacturing.
The dollar index (DXY), which gauges the performance of the greenback against a trade-weighted basket of six major currencies, rose to 77.232, up from 76.762 in North American trading late Thursday.
The euro slipped to $1.4373 from $1.4498 late Thursday. The European single currency fell 1% against the Japanese unit to change hands at 130.59 yen and declined 0.5% against the British pound to buy 88.30 pence.
The British pound fell 0.4% against the U.S. dollar to $1.6280.
The dollar slipped against its Japanese counterpart, buying 90.87 yen, down from 91.20 Japanese yen Thursday.
The U.S. government's consumer-price index rose 0.1% in December -- a slower pace than analysts expected. The report also showed prices rose 2.7% in 2009, while core prices, excluding food and energy, rose 1.8%.
Manufacturing activity in New York state strengthened in early January, the New York Federal Reserve said. The Empire State Index rose to 15.9 in January from an upwardly revised 4.5 in December. Readings above zero indicate more firms were growing than contracting.
The output of the nation's factories, mines and utilities rose a seasonally adjusted 0.6% in December, the sixth increase in a row following the worst downturn since the end of World War II, the Federal Reserve reported Friday.
The Reuters/University of Michigan gauge of consumer sentiment rose less than some economists expected.
The euro was the big loser versus the dollar and other major currencies, slipping as worries about Greece's fiscal situation persisted. The euro also saw pressure from rumors that German Chancellor Angela Merkel was preparing to resign.
Merkel subsequently said talk of resignation was "absurd." Earlier, a government spokesman said the rumors were "utterly unfounded."
Investors reacted skeptically to the Greek government's budget plan. Worries about Greece's financial woes and the risk of contagion and increased tensions within the single-currency region have served to put moderate pressure on the euro since December.
"The euro is coming under pressure as investors grapple with the possible ramifications of crippled public finances in Greece and whether this may spread to other countries," said Andrew Wilkinson, senior market analyst at Interactive Brokers.
Kenneth Broux, market economist at Lloyds TSB, said concerns about Greece continue to cloud the outlook for the euro. At the same time, expectations for rate increases by the U.S. Federal Reserve have been tamped down.
As a result, that's keeping the euro/U.S. dollar cross largely in balance, he said. The euro could slip toward $1.4280, but it's difficult to see a breakout either way in the near term, Broux said.
Copyright 2009 Dow Jones Newswires
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