Forex - Dollar falls on soft CPI data, solid industrial production

Investing.com - The dollar fell against the world's major currencies on Friday after inflation figures came in weaker than expected.

In U.S. trading on Friday, EUR/USD was up 0.61% at 1.3156.

The U.S. Bureau of Labor Statistics reported earlier that the country's consumer price index decreased by 0.3% in November from October, more than expectations for a 0.2% contraction and off from a 0.1% rise the previous month.

Year-on-year inflation rates came to 1.8%, below forecasts for a 1.9% reading.

The U.S. core consumer price index, which excludes more volatile food and energy costs, rose 0.1% last month, missing expectations for a 0.2% rise and off from a 0.2% increase in October.

The Federal Reserve recently ramped up its stimulus programs and said interest rates will remain at rock-bottom levels as long as unemployment rates hover above 6.5% and as long as annual inflation rates stay below 2.5%, which market participants viewed on Friday as increasingly unlikely in the distant future.

Elsewhere, the Federal Reserve reported earlier that U.S. industrial production beat expectations in November, expanding 1.1% after a 0.7% decline in October.

Analysts had expected industrial production to rise 0.3% in November.

The better-than-expected numbers prompted investors to sell the dollar and go longer on higher-yielding asset classes earlier, though fears a budgetary impasse in Washington that could potentially contract the economy next year if left unresolved bolstered the greenback on the flipside.

Elsewhere, the Markit research group reported that the U.S. manufacturing purchasing managers' index climbed to a preliminary 54.2 in December, its best performance since April, from 52.8 in November, beating market forecasts for a decline to 52.6.

The greenback, meanwhile, was down against the pound, with GBP/USD trading up 0.26% at 1.6155.

The dollar was down against the yen, with USD/JPY trading down 0.14% at 83.53 and down against the Swiss franc, with USD/CHF trading down 0.56% at 0.9183.

The dollar was mixed against its cousins in Canada, Australia and New Zealand, with USD/CAD up 0.15% at 0.9864, AUD/USD up 0.30% at 1.0560 and NZD/USD trading up 0.20% at 0.8449.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.39% at 79.69.