Dollar steadies after benign US inflation curbs Fed rate hike bets

On Thursday, the U.S. dollar remained relatively stable after July's producer prices remained unchanged, reducing expectations of a September Federal Reserve interest rate increase. The Producer Price Index for final demand showed no growth in July, matching a revised 0.1 percent decline from June, contrary to economists' predictions of a 0.2 percent rise.

This came after Wednesday's consumer price inflation report, which indicated only a slight rise in U.S. consumer prices last month. Analyst Noel Dixon, from State Street, suggested that the components of Thursday's report, which feed into the personal consumption expenditures data set for later this month, indicate a strong report.

Dixon expects the Federal Reserve to maintain its September meeting on hold. Fed funds futures now show a 35 percent chance of a September hike, down from 40 percent on Wednesday and 55 percent a week prior. The dollar index, which compares the U.S. dollar to a basket of currencies, including the yen and euro, rose by 0.02 percent to 99.96, after briefly falling to 99.80 following the PPI report.

The euro gained 0.03 percent to $1.1528. Traders have been considering whether the Fed may need to raise rates due to persistent inflation above the central bank's 2 percent target and soaring oil prices caused by potential disruptions in the Strait of Hormuz. Oil prices slightly recovered to less than a 1 percent loss after a more than 3 percent drop earlier in the day, following reports that Yemen's Houthis targeted a Saudi Aramco refinery with drones, sparking concerns over supply disruptions in an already tight global market.

Other data on Thursday revealed that the number of Americans filing for unemployment benefits rose moderately last week, indicating a stable labor market despite July's unexpected job losses. Retail sales data is expected on Friday to further assess U.S. economic resilience. The Japanese yen weakened slightly against the dollar, while the Norwegian krone weakened as well due to a stable interest rate decision and softened inflation.