The US dollar index remained essentially flat on Friday afternoon, erasing earlier gains. Data showed the Federal Reserve's preferred inflation measure met economists' expectations, keeping market expectations for Fed rate cuts stable.

The Bloomberg Dollar Spot Index was basically unchanged, fluctuating between gains and losses during the session.

The dollar index is set to decline 1.7% for August.

US consumer spending in July posted its largest increase in four months, indicating demand remains resilient despite persistent inflation.

"The US July PCE data met market expectations, which will further dampen market expectations for a significant 50 basis point rate cut by the Fed in September," said Brown Brothers Harriman strategist Elias Haddad.

Corpay Chief Market Strategist Karl Schamotta noted that the report makes it "harder to justify aggressive rate cuts beyond the widely expected September cut."

USD/CAD fell 0.1% to 1.3736.

Canada's economy contracted in the second quarter for the first time in nearly two years, as trade wars with the US squeezed exports and business investment.

GBP/USD dropped 0.1% to 1.3502, performing worst among G-10 currencies.

EUR/USD rose 0.1% to 1.1695, set to decline 0.2% for the week.

USD/JPY gained 0.1% to 147.00.

Tokyo's inflation rate slowed significantly due to government utility subsidies, but remained well above the Bank of Japan's target, keeping it on track for further rate hikes.