The dollar oscillated Friday after a key gauge of US consumer prices rose by more than expected, pushing traders to add to bets that the Federal Reserve will raise interest rates next week. The Bloomberg Dollar Spot Index rose as much as 0.2%, touching the highest level in a week, after core monthly inflation data for August rose 0.3% above the expected 0.2%.

The jump, however, quickly faded as declining oil prices weighed on the greenback. The gauge was trading 0.1% lower at 9:19 a.m. in New York.

"The report was in the range of being supportive for a Fed hike but not so hot to cause more alarming fears of inflation getting out of control," said Nathan Thooft at Manulife Investment Management. "Weaker oil also supportive of the moves in the dollar."

The greenback has advanced in the previous session after US producer prices and an oil rally added to expectations of the Fed to increase borrowing costs this year. On Friday, oil pared that sharp gain, eroding support for the greenback. The Japanese yen rallied ahead of its major peers, with the Norwegian krone and Canadian loonie lagging behind.