Dollar Retreats as Smaller-Than-Expected Inflation Data Weighs on Rate Hike Bets

The U.S. dollar retreated on Wednesday after data showed inflation rose by a smaller-than-expected 0.3% last month, according to the Commerce Department's Personal Consumption Expenditures Price Index.

This decrease in inflation expectations weighed on market bets for an interest rate hike from the Federal Reserve, causing the dollar to pare its recent gains against major currencies.

The dollar had been strengthening alongside rising U.S. Treasury yields, fueled by expectations of more Fed rate hikes amid inflation driven by higher oil prices.

However, the data release led to a decline in U.S. Treasury yields across the board, with the 2-year note yield falling 5.82 basis points to 4.831%.