Dollar gains on euro inflation report

European currency slides on lowest inflation in nearly 10 years and rising unemployment rate.

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By David Goldman, staff writer

NEW YORK ( -- The dollar gained against the euro Friday after a European Union report showed euro-zone inflation fell to a near-10 year low and unemployment in the region rose to a two-year high.

Consumer prices in the 16-nation euro area gained just 1.1% over the past 12 months, down from 1.6% by that measure in December, according to Eurostat, the European Union statistics office. It was the lowest level for year-over-year inflation since July 1999, the report said.

The euro fell as the European Central Bank gained more wiggle room to reduce interest rates, which tend to stimulate economic growth while raising prices. The EU report also showed unemployment rose to 8% in December, the highest level since November 2006.

The euro dropped to $1.2823, down 1% from Thursday's close of $1.2956.

The dollar fell slightly, however, against the Japanese yen and British pound. The yen tends to rise against struggling high-yielding currencies like the euro. The pound, which fell to a 23-year low against the dollar last week, has stabilized in recent days.

The pound rose to $1.4311, up 0.1% from $1.4302, and the dollar fell to ¥89.66, down 0.4% from ¥90.02.

The dollar's slight movement against the Japanese and British currencies may fluctuate after the U.S. Commerce Department releases its report on fourth-quarter gross domestic product. Economists surveyed by expect the report, which is due out at 8:30 a.m. ET, to show GDP declined by an annual rate of 5.4% in the quarter. To top of page

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