Dollar rally pauses as Fed plays calm hand on inflation surprise

Dollar rally pauses as Fed plays calm hand on inflation surprise

TOKYO - The dollar took a breather on Friday but looks set to post weekly gains against a basket of currencies as investors weighed the risk of U.S. inflation rising faster than expected and prodding the Federal Reserve to hike interest rates sooner. A strong reading on U.S. wholesale prices and jobless claims on Thursday failed to spark a renewed uptick in Treasury yields, which some traders put down to the market already pricing in a degree of inflation worries. Moreover, the Federal Reserve has been sticking to its script that its stimulus will be in place for some time to support the economy, with officials viewing a spike in inflation as transitory. "We've seen some surprise economic data. But because the Fed hasn't budged an inch in its stance, markets won't be able to keep talking up the inflation story," said Masaru Ishibashi, joint general manager of trading at Sumitomo Mitsui Bank. In mid-Friday Asian trade, the dollar index stood at 90.707, sitting on a gain of 0.5% so far this week and keeping some distance from its 2-1/2-month low of 89.979 set on Tuesday. Against the yen, the dollar stood at 109.50 yen, below Thursday's one-month high of