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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

By Johann M Cherian

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

Friday, heading for its fifth-straight monthly decline as

traders braced for further bouts of uncertainty around trade and

fiscal health, while investors awaited a pivotal inflation

report 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, a day

after a separate trade court had ordered an immediate block on

tariffs.

Trump on Thursday criticized the trade court's decision and

said he hoped the Supreme Court would overturn the decision.

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

the 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 the mood in the markets was cautious.

Thursday's weekly jobless claims and economic growth data

did little to placate worries of an economic downturn. The focus

will be on the Federal Reserve's preferred inflation data - the

personal consumption expenditure report - later on Friday.

Much of the month was also dominated by 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.

On Friday, the euro was slightly firmer at

$1.1378, while the Swiss franc was also stronger at

0.8216 per dollar.

The U.S. currency was set for monthly declines against the

Swiss franc, the euro as well as the pound.

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

a basket of six other currencies, was muted on the day. The

index was set for a decline of 0.4% in May, on course for its

fifth month in the red.

On the flip side, markets have been taking notice of

emerging market assets in recent weeks. An index tracking

emerging market currencies has gained 2.2% for

the month - its biggest one-month rise since November 2023.

On Friday, the Japanese yen firmed 0.3% to 143.73 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.

However, the dollar is on track for a small monthly rise

against the yen, its first after five previous months in the

red.

Markets are also on the lookout for any fresh clues on

highly anticipated trade deals as the Trump-mandated July 9

deadline on tariffs draws near.

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

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

investors question debt sustainability of the economies.

Elsewhere, the Australian dollar eased a bit to

$0.6429 and was set for a marginal rise in May. The New Zealand

dollar last bought $0.5973.