The US dollar weakened on Thursday, retreating from an 18-month high as declining Treasury yields and cautious comments from Federal Reserve officials reduced expectations of an immediate interest rate increase.
The dollar index, which measures the currency against a basket of major counterparts, fell approximately 0.2% to 102.03 after strengthening in response to higher-than-expected US inflation figures.
The decline provided support for several major currencies, with the euro and British pound each gaining around 0.5% against the dollar.
US government bond yields also moved lower as investors reassessed the outlook for monetary policy and shifted toward defensive assets following sharp declines in technology stocks.
The benchmark 10-year Treasury yield fell to approximately 5.09%, while the 30-year yield traded near 5.43%.
Although stronger inflation had initially increased expectations of an October interest rate hike, comments from Federal Reserve policymakers suggested that further economic evidence may be needed before a policy change.
The adjustment in market expectations contributed to volatility across major currency pairs, with traders balancing persistent inflation concerns against risks to financial stability and economic growth.
The Australian dollar faced additional pressure following weaker domestic employment data, while the Japanese yen and Chinese yuan recorded modest gains.
Investors are now focusing on upcoming US retail sales and producer price figures for further evidence of inflationary pressures and economic resilience.
The next Federal Reserve policy decision remains a major source of uncertainty for currency markets, with traders closely monitoring interest rate expectations, government bond yields and developments across global financial markets.
