Dollar flat after inflation data

The US dollar was mostly flat against peer currencies on Friday after data showed a less-than-expected increase in inflation in January, suggesting the Federal Reserve could continue to hold rates steady in the near term.

The Japanese yen was set for its strongest weekly gain in about 15 months.

US Labor Department data on Friday showed that the consumer price index rose 0.2 percent last month compared with an estimate of 0.3 percent from economists polled by Reuters.

The euro was 0.02 percent higher at $1.1873 against the dollar, but was set to gain 0.5 percent this week. Against the Swiss franc , the dollar weakened 0.22 percent to 0.76785 and was on course for a weekly loss of 1 percent.

The dollar’s behavior reflects market positioning as it awaits fresh central bank signals on the direction of interest rates, said Olivier Bellemare, senior derivatives trader at Monex Canada in Montreal.

MARKET REACTION IS ‘TIMID’

Earlier this week, data suggested the US labor market was stabilizing with a drop in the US unemployment rate amid strong jobs growth in January and a less-than-expected decrease in the number of Americans filing new applications for unemployment.