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Dollar Loses Ground As Rate Hike Expectations Fade After Tame Inflation Data

The U.S. dollar drifted lower against its major rivals on Wednesday as data showing the nation's consumer inflation slowed more than expected in July, raising speculation that the central bank will be less aggressive with regard to interest rate hike in September.

Data from the Labor Department said the consumer price index was unchanged in July after jumping by 1.3% a month earlier. Economists had expected prices to edge up by 0.2%.

The data also said core consumer prices, excluding food and energy prices, rose by 0.3% in July, as against expectations for a 0.5% increase. The annual rate of core consumer price growth was unchanged at 5.9%, while economists had expected an acceleration to 6.1%.

The tamer than expected inflation data has led to speculation that the Federal Reserve will slow the pace of interest rate hikes at its September meeting.

CME Group's FedWatch tool is currently indicating a 58.5% chance of a 50 basis point rate hike and a 41.5% chance of a 75 basis point rate hike.

U.S. treasury yields fell after inflation data. The yield on U.S. 10-year Treasury note dropped to 2.674% before edging up.

The dollar index dropped to 104.64 before recovering to 105.23, but it still remains deep down in negative territory, netting a loss of nearly 1.1%.

Against the Euro, the dollar slid to $1.0301 from $1.0214.

The dollar is trading at $1.2217 against Pound Sterling, weakening from $1.2076.

Against the Japanese currency, the dollar is down sharply, fetching 132.92 yen a unit, as against 135.16 yen on Tuesday.

The dollar is trading at 0.7084 against the Aussie, losing from 0.6965. Against Swiss franc, the dollar is weak at CHF 0.9427, easing from CHF 0.9535.

Against the Loonie, the dollar has dropped to C$1.2776 from C$1.2889.

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