Dollar Index Muted on Tame US Inflation Data and Lower Fed Hike Odds

The dollar index traded around 99.9 on Friday without clear direction as subdued US inflation data led traders to reduce expectations for a Federal Reserve rate hike in September.

Data released Thursday showed that US producer prices were unchanged in July, providing further evidence that price pressures are not broadly accelerating following Wednesday's tame CPI report.

Moderating inflation reduces pressure on the Fed to raise interest rates in the near term, with markets now pricing in around a 35% chance of a 25 basis point rate hike in September, down from 55% a week earlier.