The U.S. dollar rallied against its major rivals on Friday, erasing early losses, as core inflation in April rose most since January 2013, providing case for a Fed rate hike later this year.

The Labor Department report showed that the core consumer price index rose by 0.3 percent in April following two consecutive 0.2 percent monthly increases.

Economists were expecting an increase of 0.2 percent.

The CPI inched up by 0.1 percent on month in April, matching economist estimates. In March, the inflation rose by 0.2 percent.

The Federal Reserve Chair Janet Yellen is due to speak on the economic outlook before the Greater Providence Chamber of Commerce Economic Outlook at 1:00 pm ET.

The greenback had been trading in a negative territory since the beginning of today's deals, as Thursday's weak economic data had cast doubts over economy's strength.

The greenback advanced to a new 4-week high of 1.2269 against the loonie, up by 0.60 percent from Thursday's closing quote of 1.2196. The next likely resistance for the greenback-loonie pair is seen around the 1.25 mark.

Bouncing off from an early 3-day low of 1.1207 against the euro, the greenback rose to a 2-day high of 1.1075. If the greenback extends gain, 1.10 is possibly seen as its next resistance level. At yesterday's close, the pair was quoted at 1.1110.

The final data from Destatis showed that Germany's economic growth eased as estimated in the first quarter largely due to the weakness in foreign trade.

Gross domestic product grew 0.3 percent sequentially in the first quarter, slower than the 0.7 percent expansion seen in the fourth quarter.

The greenback, having fallen to 1.5689 against the pound at 2:00 am ET, reversed direction with pair trading at 1.5537. The pair was trading at 1.5659 at yesterday's close. Continuation of the greenback's uptrend may lead it to a resistance surrounding the 1.545 mark.

Bank of England Deputy Governor Minouche Shafik said productivity growth is likely to resume and factors pulling inflation down could be temporary.

"I think it is reasonable to expect that resumption in productivity growth to come over the next year or so as the continued narrowing of slack in the labor market raises the incentive to increase output by increasing output per worker," she said at the Association of Corporate Treasurers Annual Conference on Friday. But the degree of uncertainty around the timing is high.

The greenback spiked up to 0.9425 versus the Swiss franc, its strongest since April 30, from an early 3-day low of 0.9285. The greenback is likely to challenge resistance around the 0.96 level. The greenback closed yesterday's trading at 0.9366 versus the franc.

The greenback strengthened to more than 2-month highs of 121.54 against the yen and 0.7827 against the aussie, off its early 2-day lows of 120.63 and 0.7931, respectively. On the upside, 123.00 and 0.77 are possibly seen as the next resistance levels for the greenback against the yen and the aussie.

The U.S. currency trimmed its early decline against the NZ dollar, trading at 0.7301. This is a 1.26 percent increase from its early 3-day low of 0.7394. Extension of the greenback's uptrend may lead it to a resistance surrounding the 0.725 mark. The pair ended Thursday's trading at 0.7343.

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