Dollar struggles to pare losses after inflation data misses expectations

© Reuters. The dollar was on track to post a weekly loss – The dollar fell against a basket of global currencies on Friday, pressured by data showing the slowdown in inflation continued in July, weakening the Federal Reserve’s case for a third rate hike later this year.

The , which measures the greenback’s strength against a trade-weighted basket of six major currencies, fell by 0.32% to 93.01.

The Labor Department said on Friday the (CPI) edged up 0.1% last month after being unchanged in June. That lifted the year-on-year increase in the CPI to 1.7% from 1.6% in June.

Economists had forecast the CPI rising 0.2% in July and climbing 1.8% year-on-year.

The downbeat consumer inflation report comes a day after wholesale inflation data undershot expectations, pointing to a continued slowdown in inflation, narrowing expectations the Federal Reserve may keep to its plan to hike rates at least once more this year.

The stuttering pace of inflation has been a key concern for the Federal Reserve, weighing on the central bank’s decision to tightened monetary policy further, after Fed members voted to keep rates unchanged in July.

Meanwhile, Dallas Fed President Rob Kaplan on Friday downplayed the prospect of a third rate hike, saying the Fed’s key interest rate is getting close to a “neutral” level so the Fed should patiently wait for further evidence that inflation will rise before tightening policy.

The euro and sterling were the main beneficiaries of the slump in the greenback, as the latter hit session highs.

rose 0.20% to $1.3004 while tacked on 0.34% to $1.1813.

fell 0.15% to Y109.04, as geopolitical tensions between the U.S. and North Korea remained, boosting demand for safe-haven yen.

lost 0.45% to C$1.2685.

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