The dollar index, which measures the greenback's performance against a basket of currencies traded slightly lower in late-afternoon Friday as the euro extended its gains.
The dollar also traded lower against the yen at 118.83 after having rebounded from a three-week low against the Japanese currency amid data showing inflation starting to creep into the U.S. economy, a development that should keep the Federal Reserve on track to lift interest rates this year.
The inflation data, however, did not change the market's expectation for the timing of a Fed rate hike, especially after recent soft U.S. economic figures. Analysts are still pricing in just one rate increase this year, sometime late in the fourth quarter.
U.S. consumer prices rose 0.2 percent in March, gaining for a second straight month, propelled by higher costs for gasoline and housing. Closely watched core consumer prices showed a rise of 1.8 percent year-on-year, inching closer to the Fed's 2.0 percent target.
"We had a stronger core CPI, which suggests that inflation is starting to firm as the Fed expected, and that's positive for the dollar," said Vassili Serebriakov, currency strategist at BNP Paribas.