Dollar near two-month trough as US inflation data awaited

The US dollar has slipped to a two-month low, awaiting the release of US inflation data this week, which could provide clues on the Federal Reserve's rate path. The euro has risen to near its strongest level in mid-June, while the British pound is steady at its five-week peak. The yen remains strong, having given back some intervention-driven gains.

The dollar index, which measures the currency against six key peers, is little changed, hovering near its lowest level since mid-June. Earlier data showed the US economy unexpectedly shed jobs in July, with job gains for the previous two months revised sharply lower. This has cooled expectations for a Federal Reserve rate hike next month, causing US Treasury yields to fall.

Futures markets now estimate a 44 percent chance of a September rate move, down from 67 percent a week ago. The weaker job market signal has dampened real-rate expectations, prolonging the dollar's decline. However, a clean easing story has not yet emerged. Market strategists believe inflation data will be the biggest factor influencing currencies this week, with consensus forecasts for core CPI to rise by 0.2 percent month-on-month and annual inflation at 2.5 percent, both slight easing from the previous month.

The annual rate remained at 2.6 percent in June. Upcoming retail sales figures and producer price data will provide further insight into inflation expectations. Despite the inflation uncertainty, the Federal Reserve remains on the sidelines, waiting for clearer data before making any moves. Meanwhile, oil prices rose on Monday, reflecting continued uncertainty over the reopening of the Strait of Hormuz, with Iran reportedly close to finalizing a deal with Oman defining new shipping lanes, pending US agreement on additional conditions. In Asia, the New Zealand dollar and Australian dollar each slipped slightly against the dollar.