NEW YORK (Reuters) - The dollar edged higher against a basket of currencies on Friday, paring some of the week’s losses, as a stronger-than-expected rise in U.S. and Chinese inflation gauges drove up bond yields. The U.S. Dollar Currency Index, which measures the greenback against a basket of six currencies, was 0.10% higher at 92.163. “We’re seeing a consolidation in the broad U.S. dollar today after a week of losses as inflation data from China and the U.S. sparks the U.S. treasury curve back into life,” said Simon Harvey, currency analyst at broker Monex Europe. Data on Friday, showed U.S. producer prices increased more than expected in March, resulting in the largest annual gain in 9-1/2 years, fitting in with expectations for higher inflation as the economy reopens amid an improved public health environment and massive government funding. Inflation is expected to heat up this year, driven by pent-up demand and as the weak readings last spring drop out of the calculation. Prices tumbled early in the pandemic amid mandatory closures of non-essential businesses across many states to slow the first wave of COVID-19 infections. Most economists and Federal Reserve officials believe higher inflation will be transitory because of labor market slack. Earlier on Friday, data showed China’s factory gate prices beat analyst expectations and rose at their fastest annual pace since July 2018 in March, the latest sign that a recovery in the world’s second-largest economy is gathering momentum. The dollar was also helped by data showing a second straight monthly drop in industrial production in Germany, further boosting the likelihood of Europe’s biggest economy having contracted in the first quarter. Still, the dollar’s rally this year appears to have run out of steam. Despite Friday’s gains, the dollar index was on pace to finish the week down 0.9%, its worst weekly showing this year. “I guess this may only be a pause with the US dollar selling likely to resume so long as the Fed’s patient rhetoric remains unchanged, especially this early in the anticipated inflation cycle,” Stephen Innes, chief global market strategist at Axi, said in a note. Sterling pared losses to trade little changed on the day after having touched a two-month low against the dollar in early London trading. It was still set for its biggest weekly drop against the euro so far this year, hurt by profit-taking after a strong first quarter. The Australian dollar also fell as much as 0.9%, before paring its losses. Analysts at MUFG said in a note the move had no clear macro trigger, but a financial stability report from Australia’s central bank indicating it would refrain from monetary policy action to tackle growing lending risk may have pressured the currency.