Dollar Holds Steady, On Track for Weekly Decline

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The dollar traded flat on the day but remained on course for a weekly loss, after a softer-than-anticipated U.S. inflation reading prompted traders to dial back expectations for an imminent Federal Reserve rate hike. Escalating violence in the Middle East added to the cautious tone.

Currency markets have been volatile this week as traders reassess the outlook for monetary policy amid shifting economic data and geopolitical tensions.

The euro was at $1.1445, on track for a 0.29% weekly advance, while sterling changed hands at $1.3476, heading for a 0.56% weekly gain—its third straight weekly increase—as anxieties over the UK's fiscal situation subsided.

The yen stood at 162.39 per dollar, hovering close to the 40-year trough of 162.84 hit earlier in July, with market participants on alert for potential intervention by Japanese authorities.

For the yen, its slide to multi-decade lows keeps the threat of Japanese official intervention alive, though authorities have not yet acted. Sterling's recent strength, meanwhile, highlights fading anxiety over the UK's fiscal situation, but sustainability remains uncertain. The dollar's path hinges on upcoming economic indicators and central bank signals.