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

The dollar's advance slowed down on Thursday after a benign US inflation reading led traders to reduce bets for a near-term Federal Reserve interest rate hike. The greenback was little changed against the yen but remained on course to gain around 1% this week.

U.S. consumer prices increased 0.1% in July, in line with economists' expectations, causing money markets to lower the odds of a September rate hike to 40%, down from 54% a week ago.

Michael Wan, a currency strategist at MUFG, said the Fed is likely to maintain a restrictive holding pattern in September rather than pivoting towards a hike. The dollar index was flat at 100 on Thursday but on course for a 0.4% weekly rise.