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Upbeat Tokyo core inflation underpins yen

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Fed's preferred PCE inflation data awaited

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Dollar index set for fifth-straight monthly decline

(Updates to afternoon Asia trading)

By Johann M Cherian

SINGAPORE May 30 (Reuters) - The U.S. dollar wobbled on

Friday, heading for its fifth-straight monthly decline as

traders braced for further uncertainty around trade policy and

U.S. fiscal health while awaiting pivotal inflation reports

later in the day.

The greenback had a choppy week, ending lower in the

previous session after a federal court temporarily reinstated

the most sweeping of President Donald Trump's tariffs, just a

day after another court had ordered an immediate block on them.

Trump on Thursday said he hoped the Supreme Court would

overturn the trade court's decision, while officials also

indicated that they could employ other presidential powers to

ensure the tariffs take effect.

The uncertainty around tariffs has taken a vice-like grip on

markets as investors flee U.S. assets looking for alternatives,

worried that Trump's erratic policies could challenge the

strength and outperformance of U.S. markets.

"The (court) decision marks the beginning of a new source

of uncertainty rather than the total closure of another," said

Kyle Rodda, senior financial market analyst at Capital.com,

noting that the mood in the market was cautious.

On Friday, the euro was slightly firmer at

$1.1378, ahead of German inflation data for May while the Swiss

franc was little changed at 0.8225 per dollar.

The U.S. currency though was set for monthly declines

against the Swiss franc, the euro and the pound.

Thursday's weekly jobless claims and economic growth data

did little to placate worries of a U.S. economic downturn.

Investor focus will be on the Federal Reserve's preferred

inflation data - the personal consumption expenditure (PCE)

report - later on Friday.

Worries about fiscal debt levels in developed economies,

highlighted by weak appetite for freshly issued longer-dated

credit in the U.S. and in Japan, have also weighed.

The dollar index, which tracks the U.S. unit against

a basket of six other currencies, was 0.16% higher at 99.416.

The index was set for a decline of 0.25% in May, its fifth

straight month in the red.

On the flip side, markets have taken note of emerging market

assets. An index tracking emerging market currencies

has gained 2.2% for the month - its biggest

one-month rise since November 2023.

INFLATION WATCH

The Japanese yen firmed 0.3% to 143.80 per dollar

after data showed underlying inflation in Tokyo hit a more than

two-year high in May, keeping alive the chances of further

interest rate hikes from the Bank of Japan.

"The BOJ is in a difficult position," said Min Joo Kang,

senior economist at ING. "Inflationary pressures remain hot,

while the economic recovery remains fragile -- and facing strong

headwinds from US tariffs."

However, the yen is on track for its first monthly decline

against the dollar this year.

Markets are also on the lookout for clues on highly

anticipated trade deals as the Trump-mandated July 9 deadline on

tariffs draws near.

The U.S. PCE data is likely to show that inflation rose 2.2%

in April, according to economists polled by Reuters, compared

with a 2.3% increase in March.

The Fed tracks the PCE price measures for its 2% inflation

target. Economists are forecasting a surge in inflation this

year as the Trump administration's import duties raise the cost

of goods.

Yields on longer-dated U.S. and Japanese bonds have eased

this week, but still remain close to multi-month highs.

Benchmark 10-year Treasury yields were last steady

at 4.426%.

Elsewhere, the Australian dollar eased slightly to

$0.6431, while the New Zealand dollar was last bought

at$0.5968.