NEW YORK, May 31: The dollar lost some ground late on Friday as the euro rebounded in the wake of US economic news that traders said reduced the likelihood the Federal Reserve would move to raise interest rates anytime soon.

The euro regained some traction against the dollar, which has fallen sharply in value against the euro and other currencies in the past year, following the release of a US Commerce Department survey on consumer spending and income.

Traders zeroed in on an inflation barometer buried in the report which showed a mild 0.2 per cent rise in prices for the month. Stripping out volatile food and energy prices, the “core” index reading rose just 0.1 per cent.

Analysts said the tame inflation readings lowered the odds of a Fed rate hike and renewed downward pressure on the dollar. The Fed has expressed concerns about inflationary pressures in recent months as world oil prices have rocketed to record highs.

The euro was priced at $1.5553 up slightly from 1.5503 dollars late Thursday. The euro regained strength after dipping to 1.5487 dollars in earlier trading.

Against the Japanese currency, the dollar slipped a notch to 105.51 yen from 105.52 a day earlier.

The Fed has slashed interest rates this year in a bid to boost US economic momentum, but its rate cuts have weighed on the dollar as investors typically prefer to hold currencies in countries with strong rates.

The Fed’s key short-term rate is presently pegged at 2.0 percent.

So long as the housing sector is weak, the US needs a weak dollar to keep its economy in the black. Once housing recovers and/or oil prices decline, then the US reliance on dollar weakness will diminish, analysts at ABN AMRO said in a research note.

The weak US dollar has helped spur US exports, which have shored up economic growth. New York oil prices simmered around $127 a barrel Friday after spiking to all-time highs over $135 a last week.

The euro has gained momentum against the dollar in recent months as the European Central Bank has opted not to cut eurozone rates, despite rising inflation fears on that side of the Atlantic.

The British pound, which came under pressure Thursday after the Nationwide bank said that house prices fell by 2.5 per cent in May from April, also rebounded against the US currency.

The pound was swapping hands at $1.9818, up from 1.9745.

In late New York trade, the dollar was quoted at 1.0418 Swiss francs, down from 1.0496 late Thursday—AFP