By Deborah Levine, MarketWatch NEW YORK (MarketWatch) -- The U.S. dollar slipped versus the Japanese yen and was little changed versus the euro Friday after the government said its consumer price index was unchanged in July, as analysts expected and easing concerns about inflation. The dollar bought 94.86 yen, down from 95.32 yen in North American trade late Thursday. The dollar index (DXY 78.37, -0.12, -0.15%) , which measures the U.S. unit against a basket of six major currencies, stood at 78.297, down slightly from 78.390 on Thursday. The euro traded at $1.4280 compared to $1.4304 late Thursday, giving up an earlier gain. The muted reading on the headline number pushed prices down 2.1% year-over-year, the sharpest annual decline since 1950, the Labor Department said. See more on CPI. Excluding food and energy prices, the consumer price index rose 0.1% last month, also matching forecasts of economists surveyed by MarketWatch. "The consumer price data for the month of July provides a strong reason for why the Federal Reserve is in no rush to raise interest rates," said Kathy Lien, director of currency research at Global Forex Trading. "Inflationary pressures in the U.S. economy are nonexistent." The data may lead to reduced expectations of a rate increase. Higher U.S. interest rates tend to support the dollar by making the nation's debt yields more attractive for investors compared to other countries. Overall activity remained range-bound amid light volume, strategists said. The dollar remained lower after the Federal Reserve reported that U.S. industrial output rose in July for the first time since October, led by a resurgent auto sector. The seasonally adjusted output of the nation's factories, mines and utilities increased 0.5% in July after a 0.4% decline in June. A report on consumer sentiment among Americans will follow. The euro paid little heed to data that showed annual consumer prices in the euro zone fell 0.7%, a record low and below a preliminary estimate of a 0.6% decline. Price falls are expected to diminish in coming months as comparisons with last year's spike in food and energy prices drop away, economists said. Still, significantly below-potential economic output in many euro-zone member states is likely to keep a lid on prices for some time, said Joerg Radeke, economist at the Center for Economic and Global Research. But the second-quarter return to growth reported Thursday by France and Germany makes it more likely the European Central Bank will begin tightening monetary policy beginning in the second quarter of next year, which is bad news for Ireland and Spain as they continue to dig out from collapsed housing markets, he said. Aussie dollar The Australian dollar took center stage in Asian trading Friday, jumping against the U.S. dollar on tough talk by Reserve Bank of Australia Governor Glenn Stevens before paring gains as investors took profits. Stevens said in a prepared statement that "there will come a time when the exceptional monetary stimulus in place at present will no longer be needed. It will then be appropriate for the Board to do what it has done on past such occasions, namely to start adjusting interest rates back towards normal levels." Later, he reportedly said he didn't want to specify what level "normal" monetary policy represented, but it was much higher than the present "emergency" setting of 3.0%. The RBA cut a total of 425 basis points, or 4.25 percentage points, between September 2008 and April 2009, to help the Australian economy weather the global crisis. Earlier this month, the RBA kept its policy cash rate steady as widely expected, and indicated it is moving away from an easing bias as the economy recovers. See full story on RBA meeting. The Aussie bought 84.28 U.S. cents, compared with 84.25 U.S. cents late Thursday. Earlier Friday, it rose as high as 84.77 U.S. cents.

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