Dollar near two-month trough as US inflation data awaited

The U.S. dollar slipped to a two-month low on Monday as investors anticipated key inflation data from the Federal Reserve. The euro strengthened to $1.1558, nearing its strongest point since mid-June, while the British pound held steady near $1.3490, close to a five-week high. The Japanese yen maintained resistance near 157.90 per dollar, after recent intervention-driven gains but remained far from the multi-decade low reached last month.

The dollar index, which compares the currency to six major counterparts, held steady at 99.6, nearing its dip since June 2. Data released on Friday showed a surprise drop in U.S. jobs in July, with prior months' job growth revised downward, dampening expectations for a Federal Reserve rate hike next month. U.S. Treasury yields slipped as the weaker-than-expected jobs report reduced the odds of a rate increase, with the 10-year note yield at 4.637 percent.

Futures markets now estimate a 44 percent chance of a September rate hike, down from 67 percent a week earlier. The expected moderation in inflation, as suggested by the jobs data, will likely be the primary driver for currency movements this week, according to analysts.