FOREX-U.S. dollar advances as inflation data affirms Fed rate hike next week

U.S. PCE rises in March, but at slower rate

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Fed remains on track to raise interest rates next week

By Gertrude Chavez-Dreyfuss NEW YORK, April 28 (Reuters) - The U.S. dollar rose on Friday after data showed inflation grew in March, though at a slower pace, keeping the Federal Reserve still firmly on track to raise interest rates at next week's monetary policy meeting.

The dollar index, a measure of the greenback's value against six major currencies, rose 0.7% to 102.10 . Against the yen, the U.S. currency rose 1.5% to 136.07 yen . The euro, meanwhile, fell 0.4% against the dollar to $1.0984 Friday's data showed the personal consumption expenditures (PCE) price index edged 0.1% higher in March after rising 0.3% in February. In the 12 months through March, the PCE price index increased 4.2% after climbing 5.1% in February. Excluding the volatile food and energy components, the PCE price index inched up 0.3% after increasing at the same rate in February. The so-called core PCE price index gained 4.6% on a year-on-year basis in March after rising 4.7% in February. The Fed tracks the PCE price indexes for its 2% inflation target.

"It's another mixed bag of data, but what stands out is the frustratingly slow descent in core inflation," said Joe Manimbo, senior market analyst at Convera in Washington.

"So, the dollar's benefiting from elevated core inflation, which I think is leading the market to rethink the outlook for rate cuts later this year and I think it sets the stage for the Fed to reiterate that interest rates are likely to remain higher for longer."

Following the data, the rate futures market has priced in a 90% chance of a 25 basis-point hike next week.

======================================================== Currency bid prices at 8:55AM (1255 GMT) Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change

Session
Dollar index 101.9800 101.4500 +0.53% -1.459% +102.1700 +101.4200 Euro/Dollar $1.0984 $1.1029 -0.41% +2.51% +$1.1040 +$1.0963 Dollar/Yen 136.0800 134.0100 +1.56% +3.81% +136.4000 +133.3600 Euro/Yen 149.38 147.77 +1.09% +6.47% +149.5300 +147.2300 Dollar/Swiss 0.8949 0.8944 +0.07% -3.21% +0.8975 +0.8930 Sterling/Dollar $1.2489 $1.2500 -0.10% +3.25% +$1.2504 +$1.2447 Dollar/Canadian 1.3635 1.3591 +0.33% +0.64% +1.3668 +1.3592 Aussie/Dollar $0.6585 $0.6630 -0.67% -3.39% +$0.6642 +$0.6573 Euro/Swiss 0.9828 0.9862 -0.34% -0.68% +0.9868 +0.9827 Euro/Sterling 0.8793 0.8824 -0.35% -0.58% +0.8839 +0.8794 NZ $0.6148 $0.6148 +0.00% -3.18% +$0.6159 +$0.6124 Dollar/Dollar
Dollar/Norway 10.7340 10.6210 +1.14% +9.46% +10.7690 +10.6290 Euro/Norway 11.7920 11.7106 +0.70% +12.37% +11.8338 +11.6981 Dollar/Sweden 10.3314 10.2857 -0.04% -0.74% +10.3522 +10.2748 Euro/Sweden 11.3486 11.3530 -0.04% +1.78% +11.3720 +11.3029

(Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Karen Brettell; Editing by Andrew Heavens and Andrea Ricci)