Dollar Flat as US Inflation Comes in Lower Than Expected

The US dollar was flat against major currencies on Wednesday after a smaller-than-expected increase in US inflation, which reduced market bets on an interest rate hike from the Federal Reserve.

The inflation data showed that the Personal Consumption Expenditures Price Index rose 0.3% last month, lower than the forecasted 0.4% increase.

This led to a decrease in expectations of a Fed rate hike in October, with the CME's FedWatch tool showing a 37% probability, down from 70% a week ago.

The dollar had been strengthening due to rising US Treasury yields on growing expectations of more Fed rate hikes amid inflation driven by higher oil prices. However, the yield fell initially across the board after the data release, causing the dollar to weaken.