The dollar inched higher on Friday as investors digested a reading on U.S. consumer sentiment and sifted through a flurry of comments from Federal Reserve officials, while the yen was poised for its fourth decline of the week.

The greenback pared declines and turned modestly higher after the University of Michigan's preliminary of consumer sentiment came in at 67.4 for May, a six-month low and below the 76.0 estimate of economists polled by Reuters. In addition, the one-year inflation expectation climbed to 3.5% from 3.2%.

The dollar had weakened on Thursday after a higher than expected reading on initial jobless claims fueled expectations the labor market was loosening, adding to other recent data that indicated the overall economy was slowing.

The dollar index, which measures the greenback against a basket of currencies, gained 0.15% at 105.38, with the euro down 0.18% at $1.0762. The dollar was on track for its first weekly gain after two straight weeks of declines.

Next week investors will eye readings on inflation in the form of the consumer price index (CPI) and producer price index (PPI), as well as retail sales data.

"What I really watch is how the markets respond to fundamental news and, to me, that really reflects psychology," said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.

"It got a series of soft economic data, and even though each piece could be explained away or downplayed, the combination of it and the way the market reacts now, it's sensitive to softer data than stronger data. We'll see next week with the CPI."

Also supporting the dollar were comments from Dallas Federal Reserve President Lorie Logan, who said it was not clear if monetary policy was tight enough to bring inflation down to the U.S. central bank's 2% goal, and it was too soon to be cutting interest rates.

That ran counter to earlier comments from Atlanta Federal Reserve President Raphael Bostic, who said the Fed likely remained on track to cut interest rates this year even if the timing and extent of the policy easing was uncertain.

Following last week's softer than expected U.S. payrolls report and Fed policy announcement, markets have been pricing in about 50 basis points (bps) of cuts this year, with a 62.2% chance for a cut of at least 25 basis points in September, according to CME's FedWatch Tool.

Against the Japanese yen, the dollar strengthened 0.23% at 155.82 and was up about 1.8% on the week against the Japanese currency after it tumbled 3.4% last week, its biggest weekly percentage drop since early December 2022 after two suspected interventions by the Bank of Japan.

On Friday, Japan's Finance Minister Shunichi Suzuki said on Friday the government would take appropriate actions on foreign exchange if needed, echoing recent comments from other officials.

Sterling weakened 0.11% at $1.2508 after earlier reaching %1.2593 in the wake of data showing Britain's economy grew by the most in nearly three years in the first quarter of 2024, ending the shallow recession it entered in the second half of last year.

(Reporting by Chuck Mikolajczak; Editing by Alex Richardson)