Dollar treads water as Fed hike bets pared on benign US inflation

The U.S. dollar showed mixed performance on Thursday as expectations of a Federal Reserve interest rate increase in September were tempered by recent inflation data. Producer prices remained unchanged in July, with the Producer Price Index for final demand remaining flat compared to June. Economists had anticipated a 0.2 percent increase in PPI.

Analysts noted that the report and subsequent consumer price inflation data suggest a positive outlook for September's Fed meeting. Fed funds futures now project a 35 percent chance of a September rate hike, down from 40 percent on Wednesday and 55 percent a week prior. The dollar index rose slightly to 99.96, while the euro gained 0.03 percent to $1.1528.

Traders weighed the possibility of a Fed rate hike as inflation remains above the 2 percent target and oil prices fluctuate due to Iran-related tensions in the Strait of Hormuz.