FOREX-US dollar holds losses after inflation data

(Updates with U.S. inflation data) NEW YORK, Jan 26 (Reuters) - The U.S. dollar held losses on Friday, after data showed inflation rose modestly in December but was trending lower, which should keep the Federal Reserve on track to cut interest rates by the middle of the year.

The U.S. dollar held losses on Friday, after data showed inflation rose modestly in December but was trending lower, which should keep the Federal Reserve on track to cut interest rates by the middle of the year. The personal consumption expenditures (PCE) price index

increased 0.2% last month after an unrevised 0.1% drop in November, data showed. In the 12 months through December, the PCE price index increased 2.6%, matching November's unrevised gain. Those numbers were in line with consensus expectations.

The annual inflation rate was under 3% for the third straight month. The Fed tracks the PCE price measure for its 2% inflation target. The dollar index fell 0.3% to 103.21.

Against the yen, the greenback was flat at 147.63 , after trading higher earlier in the session.