NEW YORK/LONDON/SINGAPORE, July 26 (Reuters) - The dollar eased fractionally along with Treasury yields after the release of U.S. price data that showed little worrisome inflation that would cause the Federal Reserve to rethink moving to a less restrictive monetary policy in the coming months.
The Commerce Department's personal consumption expenditures (PCE) price index nudged up 0.1% in June, as expected, after being unchanged in May, underscoring an improving inflation environment that potentially positions the Federal Reserve to begin cutting interest rates in September.
Year over year, the PCE price index climbed 2.5% after rising 2.6% in May, also in line with forecasts by economists polled by Reuters. The Fed closely tracks the PCE price measures for monetary policy, and subsiding inflation pressures could help officials meeting next week gain confidence that inflation is moving toward the U.S. central bank's 2% target.
Meanwhile, the yen has dominated the currency markets this month after surging to a near three-month high of 151.945 per dollar on Thursday. It started the month at a 38-year low of 161.96 before Bank of Japan currency intervention and expectations that the Bank of Japan would deliver a hawkish policy tweak at its meeting next week flushed out yen carry-trade shorts.
Dollar/yen was 0.23% firmer at 154.29. The euro was up 0.12% at $1.0857.
The dollar index , which measures the greenback against a basket of six currencies including the yen and the euro, was unchanged at 104.33 having been up 0.08% before the data.
Sterling strengthened 0.12% to $1.2866.
The yield on benchmark U.S. 10-year notes fell 3.1 basis points, while two-year note yields, which typically moves in step with interest rate expectations, fell were down 3.1 basis points after the report.
The Federal Open Market Committee meets July 30 and 31, the same days as the BOJ. It is expected to hold borrowing costs steady but traders continue to bet the Fed will cut at its next meeting in September and see up to two more rate cuts this year.
Reporting by Alden Bentley in New York, Amanda Cooper in London and Ankur Banerjee in Singapore; Editing by Gareth Jones, Kirsten Donovan and Angus MacSwan
