Dollar Treads Water as Fed Hike Bets Pared Amid Benign US Inflation

The dollar's advance slowed on Thursday after a US inflation reading showed prices increased just 0.1% in July, as expected.

This benign data led traders to reduce their bets for a near-term Federal Reserve interest rate hike, with the odds now at 40%, down from 54% a week ago, according to CME Group's FedWatch.

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

The dollar index, which measures the US currency against five other major peers, was flat at 99.976 on Thursday and on course for a 0.4% weekly rise.