SINGAPORE/GDANSK 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 eyeing pivotal inflation reports later in the day.
The greenback had a choppy week, ending lower in the previous session after a U.S. court temporarily reinstated the most sweeping of President Donald Trump's tariffs, just a day after a trade 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 down 0.4% at $1.1325, after German state inflation data painted a mixed picture ahead of national figures later in the day. Economists expect Germany's inflation rate to ease further in May.
The U.S. currency, though, was set for monthly declines against the euro, the pound and the Swiss franc , which was little changed in the session at 0.8243 per dollar.
Thursday's weekly jobless claims and economic growth data did little to placate worries of a U.S. economic downturn, and investors will focus 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 99.58. The index was set for a decline of 0.10% in May, its fifth straight month in the red - its longest streak of monthly declines since 2017.
On the flip side, an index tracking emerging market currencies (.MIEM00000CUS), has gained about 2% for the month - its biggest one-month rise since November 2023.
INFLATION WATCH
The Japanese yen was little changed at 143.93 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 yen is on track for its first monthly decline against the dollar this year.
Markets are also on the lookout for signs of 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 dollar strengthened by about half a percentage point against Scandinavian currencies to 10.16 Norwegian crowns and 9.58 Swedish crowns.
Reporting by Johann M Cherian in Singapore and Linda Pasquini in Gdansk. Editing by Rachna Uppal, Mark Heinrich and Mark Potter
