The dollar gained on Friday as concerns about continuing low oil prices added to deflation fears in the euro zone and Japan, while conversely boosting expectations that cheaper oil will help stimulate U.S. consumer spending.
Annual inflation in the euro zone cooled to 0.3 percent in November, marking a return to September's five-year low for consumer inflation, as energy prices fell, suggesting deflation remains a real threat for the European Central Bank.
Japan's annual core consumer inflation slowed for a third straight month in October due to falling oil prices, highlighting the economic gloom facing Prime Minister Shinzo Abe as he campaigns for a new mandate to implement his stalled recovery plan.
Currencies
Brent crude touched a four-year closing low on Thursday, when Saudi Arabia blocked calls from poorer members of the OPEC oil cartel to cut production to stem a slide in global prices.
The euro came off its overnight lows of $1.2430 to last trade at $1.2484. The single currency is seen as remaining under pressure ahead of next week's ECB meeting, where the central bank is expected to signal further action to ward off deflation.
The dollar gained to 118.43 , up from 117.68 yen on Thursday. The dollar index, which measures the greenback against a basket of major currencies, gained 0.46 percent to 88.905, just below four-year highs of 88.44 set on Monday.
The dollar has been bolstered in recent months by expectations that the Federal Reserve will begin raising interest rates next year as the U.S. economy strengthens, while Europe and Japan will continue to struggle with low inflation and lackluster growth.
Thursday's decision not to cut oil output also slammed commodity currencies like the Norwegian crown, which fell to five-year lows against the greenback and the euro.
The U.S. dollar rallied to more than seven Norwegian crowns for the first time in more than five years. It last traded at 6.9691, up 0.63 percent on the day.
—By Reuters