U.S. PCE index unchanged in May, up 2.6 yearonyear
Fed funds futures slightly lift rate cut chances in September
Dollaryen up nearly 6 on the month
Euro on track for biggest monthly fall since January

NEW YORK, June 28 Reuters The U.S. dollar fell against the yen on Friday after data showed inflation in the world39;s largest economy cooled down last month, cementing expectations that the Federal Reserve will start cutting interest rates this year.

The greenback has been on a tear against the yen, underpinned by wide interest rate differentials between the United States and Japan. On the year, the dollar has surged 14.

Earlier in the session, the dollar hit a fresh 38year high of 161.27 yen. But as inflation cooled, the dollar retreated on Friday, sliding 0.3 to 160.285 yen .

Data showed the U.S. personal consumption expenditures PCE price index, the Fed39;s preferred inflation measure, was unchanged last month, and followed an unrevised 0.3 gain in April, data showed. In the 12 months through May, the PCE price index increased 2.6 after advancing 2.7 in April.

Markets will breathe the sigh of relief that the PCE didn39;t really surprise one way or the other, said Carol Schleif, chief investment officer, at BMO Family Office in Minneapolis.

It39;s still indicative of an economy that39;s coasting, hopefully to a more sustainable longterm pace, with inflation still bumping its way downward.

Following the inflation data, fed funds futures slightly raised the…