* Index sees first monthly rise since February
* Dollar flat in choppy trading after mixed U.S. data (Updates to afternoon U.S. trading, adds data)
By Dion Rabouin
NEW YORK, Sept 29 (Reuters) - The dollar was little changed against a basket of major currencies on Friday after conflicting U.S. economic data, leaving it on course for its largest weekly rise in 2017 amid a rise in expectations for inflation and U.S. interest rate hikes.
The one-week rise of just under 1 percent helped the greenback post its first monthly gain against its peers since February.
On Friday, the dollar fell to session lows after the release of a report showing U.S. consumer spending barely rose in August, but that was offset by an unexpected increase in the University of Chicago’s purchasing managers’ index and an in-line reading on consumer sentiment.
Federal Reserve Chair Janet Yellen said earlier this week that the central bank planned to stay on its current rate hike path, which suggested to investors that it would raise rates in December, with further increases to follow in 2018.
The Fed has raised rates twice in 2017.
Analysts said the week’s rally was sparked by the German election last weekend in which the far-right Alternative for Germany won seats in parliament for the first time, leading to worries that anti-European political movements on the continent, including those in Spain and Italy, could be more worrisome than initially thought.
“Economically, the situation in the U.S. merits the fact that the dollar has gained,” said Juan Perez, currency strategist at Tempus Inc in Washington.
“The political dissolution in Europe continues and now with the situation in Spain it symbolizes that there are separatist movements across the continent that cannot be ignored. On a geopolitical perspective, Europe in a little bit tougher situation than we are.”
Comments from Yellen and the release of a foundation for President Donald Trump’s proposed tax overhaul also pushed inflation expectations higher, with U.S. Treasury yields rising to months- and years-long highs on Wednesday.
The dollar index, the trade-weighted basket of the greenback against its rivals, was flat at 93.02. It rose 0.9 percent for the week, its best weekly performance since September, and was up 0.35 percent for the month.
The euro rose 0.35 percent to $1.1824, having earlier hit a three-day high against the dollar. The dollar was 0.1 percent higher against the Japanese yen at 112.43 yen. (Reporting by Dion Rabouin; Editing by Paul Simao)