The U.S. dollar weakened on Friday after the release of January's U.S. Consumer Price Index (CPI), which came in below expectations. This marked the dollar's fifth decline in six trading sessions, accompanied by a drop in U.S. Treasury yields.

Around the time of the CPI data release, the dollar traded within a narrow range against most G-10 currencies.

The Bloomberg Dollar Spot Index had risen as much as 0.25% before the data was published but subsequently fell less than 0.1%. It ended the day down 0.06%.

According to European traders, leveraged accounts took profits on short dollar positions ahead of the data and the long weekend in the United States.

Following the inflation report, U.S. Treasuries advanced as investors increased their bets on Federal Reserve interest rate cuts, now pricing in more than two cuts by 2026.

"In our view, the CPI report is fairly neutral for the Fed's outlook," said Aroop Chatterjee, Managing Director at Wells Fargo Securities.

"We believe the market may be overestimating the likelihood of Fed rate cuts this year, which offers upside potential for the dollar, particularly against low-yielding currencies in both the G-10 and emerging markets."

Against the backdrop of a softer dollar, haven currencies such as the Japanese yen and the Swiss franc were among the top performers for the week.

The Bloomberg Dollar Index fell 0.8% over the week, marking its fourth decline in the past five weeks. Data from the CFTC showed that speculators increased their net short positions on the dollar to the highest level since June.

The British pound rose 0.3%, underperforming other developed-market currencies as political uncertainty surrounded Prime Minister Keir Starmer's future.

The USD/JPY pair fell less than 0.1% to 152.65, declining for a fifth consecutive session. Bank of Japan board member Naoki Tamura stated that the final component for achieving the 2% inflation target is wage growth, which is expected to be confirmed around this spring.

The EUR/USD pair closed largely unchanged on Friday at 1.1874. European Central Bank Governing Council member Martins Kazaks mentioned that the ECB is still assessing how much impact the euro's appreciation, which began in 2025, will have on the economy.

The EUR/CHF pair declined 0.2% to 0.9116. Switzerland's January inflation rate was slightly above zero, offering only limited relief to the Swiss National Bank regarding the potential reintroduction of negative interest rates.

The EUR/GBP pair fell 0.2% to 0.8697.