The U.S. dollar turned higher on Friday, spurred off its early losses by a U.S. inflation report that indicated underlying pressures are building and thereby bolstering the case for the U.S. Federal Reserve to raise interest rates later this year.

"Stronger inflation, along with stronger growth data, is something that the Fed certainly wants to see," said Brian Daingerfield, currency strategist at the Royal Bank of Scotland in Stamford, Connecticut. "Rate hike expectations have likely been brought forward as a result of some of the stronger data today."

The euro's gains were cut and the buying momentum for the dollar increased as the morning New York session incorporated the U.S. Consumer Price Index data.

While the CPI gained 0.1% in April, down from the prior month, the so-called core CPI, which strips out food and energy costs, increased 0.3%, the largest rise since January 2013, after advancing 0.2% in March.

The euro fell 0.94% to a session low of $1.10055 on the EBS trading platform. It was the weakest point since April 29 and put the euro on track for its worst weekly performance since August 2010.

The dollar climbed 0.40% to 121.51 yen, just off a fresh 10-week high of 121.57 yen. Earlier trading left the dollar flat against the yen after a Bank of Japan meeting presented a slightly more upbeat view of the economy that gave no sign it was ready to do yet more to support growth.

Investors will glean more views about the state of the U.S. economy in hopes of attaining a better understanding of when U.S. interest rates may rise from a speech by Federal Reserve Chair Janet Yellen at 1300 EDT/1700 GMT.

"The speech later today by Janet Yellen might be interesting," said Alvin Tan, a strategist with French bank Societe Generale in London. "But really the Fed is in waiting mode; we think they will raise rates in September, but they are unlikely to make that decision in the next month or two."

In Europe, Germany's often market-moving Ifo data had prodded the euro marginally higher, while there was little sign at an EU summit of the breakthrough in talks on Greece.

European Central Bank chief Mario Draghi warned in a speech that future economic growth would be modest.