Dollar falls on cooler US inflation report

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Dollar falls on cooler US inflation report

On Wednesday, the dollar fell more than 1 percent after a cooler than expected inflation report for July that raised expectations of a less aggressive rate hike cycle than previously anticipated by the U.S. Federal ReserveFederal Reserve.

In July, consumer prices in the US did not rise as the cost of gasoline plunged, giving the first sign of relief for Americans who have watched inflation go up over the past two years.

Economists had predicted a 0.2% rise in gasoline prices after a 20% drop in the cost of gasoline, according to a poll by Reuters.

The dollar index, which measures the currency's value against a basket of currencies, was down 1.128% at the time of 9: 00 a.m. Eastern Time 1300 GMT This is good news for FX traders as it is a clear reaction and you will probably see that there will be some follow-through, said Edward Moya, senior market analyst at Oanda.

The Fed has indicated that several monthly declines in CPI growth will be needed before it can respond to the increasingly aggressive monetary policy tightening it has delivered to tame inflation that is currently at four-decade highs.

They will be debating whether it is a half-point increase or 75 basis points, but I think the risk of more aggressive tightening is off the table, said Moya.

The euro climbed 1.1% to $1.0325, the sterling gained 1.17% to $1.2216 and the dollar lost 1.12% on the Swiss franc, which traded at 0.9428 per greenback.

The dollar gained 1.38% compared to the Japanese yen to 133.2 yen.

A quick read on policymakers' reaction may come from Fed officials Charles Evans and Neel Kashkari, who were expected to make speeches at 1500 GMT and 1800 GMT, though they will have another set of price data in August before September's policy meeting.

The Australian dollar was up 1.32% at $0.7054, a barometer of risk.

The value of the digital currency was up 3.61% at $24,000, up from a year ago by a drumbeat of fund wipeouts and thefts.