Dollar Stalls on Benign Inflation Reading, Fed Hike Odds Fall

The dollar stalled its advance on Thursday after a benign US inflation reading led traders to reduce bets for a near-term Federal Reserve interest rate hike.

US consumer prices increased 0.1 per cent in July, matching economists' expectations, and caused money markets to lower the odds of a September rate hike to 40 per cent from 54 per cent just a week ago.

Currency strategist Michael Wan at MUFG said the primary dilemma for the Fed now lies in weighing inflation risks against a softening labour market, particularly after the weaker-than-expected July payrolls report.

The dollar index, which measures the U.S. currency against the yen and five other major peers, was flat at 100 on Thursday but on course for a 0.4 per cent weekly rise.