Dollar in decline against the euro
NEW YORK (Reuters) - The dollar fell against the euro on Friday as some investors sold the US currency after a string of recent gains had pushed it to its first back-to-back monthly gains since January 2007.
Demand for the greenback has increased recently as oil prices eased from record highs and US government data showed tame inflation.
"The dollar had two good months of gains versus the euro," said Joe Manimbo, a currency trader at Ruesch International in Washington.
"The greenback is selling off a bit today, but it's Friday and some investors may want to cash in some gains after the good run in the currency ahead of the weekend."
In late afternoon trading, the euro was 0.3 percent higher at $1.5556, after earlier changing hands as low as $1.5463.
The euro zone common currency was headed for a second consecutive month of declines against the greenback, according to Reuters data.
A government report on Friday showed US personal spending rose in April in line with forecasts and a key measure of inflation moderated.
The dollar also garnered broad support this week from a further retreat in oil prices from last week's record of $135.09 per barrel.
"The personal income and spending report fits in nicely with recent data reflecting a bottom has been put in for the dollar," said Michael Woolfolk, senior currency strategist at Bank of New York Mellon.
"The focus right now is also on oil prices."
Other data on Friday showed business activity in the US Midwest contracted in May for the fourth consecutive month, but the rate of downturn moderated.
"It is a better-than-expected report," said Ron Simpson, director of foreign exchange research at Action Economics in Tampa, Florida.
"Overall, this is good news for the dollar. We have had decent data. Not burning down the barns, but definite signs of a stabilizing economy."
Against the yen, the dollar was down 0.1 percent on the day at 105.39 yen, but still within sight of a three-month high of 105.87 hit on Thursday.
The dollar index, a basket of six currencies, moved 0.2 percent lower to 72.879, snapping a three-day advance.
In the euro zone, inflation bounded to a historic peak of 3.6 percent in May, data showed on Friday, while German retail sales in April fell for the second month in a row.
In an interview published on Friday, European Central Bank (ECB) president Jean-Claude Trichet said that the central bank will do everything it can to preserve price stability and reinforce expectations of low inflation.
"The euro is no different to many other currencies - stuck between a rock and a hard place with slowing growth and rising inflation," said Kamal Sharma, a G10 strategist at JP Morgan in London.
"Inflation is likely to remain above the ECB's target in the near term.
"But against the backdrop of slowing growth...the ECB is unlikely to pull the trigger on rate hikes through the rest of the year."