The U.S. dollar edged higher Friday but remained on track for a weekly loss as markets braced for the release of January CPI inflation data. The Dollar Index traded 0.1% higher at 96.975, though was still down around 0.6% for the week. Traders are seeking clues about the Federal Reserve's rate path from the upcoming inflation report.

Market consensus expects mild easing in both headline and core CPI releases, but traders remain cautious about potential hawkish surprises. ING analysts noted that today's CPI report is likely to have less market impact than Wednesday's payrolls, as the Federal Reserve has signaled little urgency to cut rates again. The dollar found some support earlier in the week from stronger-than-expected January data but remains under pressure from uncertainty over U.S. monetary policy following Kevin Warsh's nomination as the next Fed Chairman.

Elsewhere, the euro traded 0.1% lower at 1.1858 ahead of Eurozone growth data, while the yen strengthened 2.4% this week - its best performance since November 2024 - following hawkish comments on potential intervention from Japanese officials. The Australian dollar gained ground, trading near a three-year high after a string of hawkish comments from the Reserve Bank of Australia boosted bets on further rate hikes.