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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 moves, adds analyst comment throughout)

By Johann M Cherian and Linda Pasquini

SINGAPORE/GDANSK May 30 (Reuters) - The U.S. dollar

wobbled on Friday en route to 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 said on Thursday 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 exerted a vice-like grip

on markets as investors flee U.S. assets in a search for

alternatives, worried that Trump's erratic policies could

challenge the strength and outperformance of U.S. markets.

"The news is making the U.S. a less attractive place for

foreign investors to go," said Kit Juckes, chief FX strategist

at Societe Generale.

This will not stop money from flowing there, Juckes

said, but investors will be looking for more attractive

incentives such as a slightly weaker currency or high yields.

On Friday, the euro was slightly lower at $1.1331,

ahead of German inflation data for May while the Swiss franc

was little changed at 0.8243 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 0.3% higher at 99.56. The

index was set for a decline of 0.10% 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 about 2% for the month - its biggest

one-month rise since November 2023.

INFLATION WATCH

The Japanese yen was little changed at 144.05 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 U.S. 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

for implementation of 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.

"The danger is the next piece of news on, for example, the

tariff impact on import prices", which however would come later

in the year, Juckes said.

Elsewhere, the Australian dollar slid to $0.6421,

while the New Zealand dollar was last bought at $0.5961.