The dollar was on the back foot on Thursday, with the euro perched near an eight-month high after data showed U.S. inflation was slowing, underpinning wagers that the Federal Reserve could lower borrowing costs next month.

The dollar was on the back foot on Thursday, with the euro perched near an eight-month high after data showed U.S. inflation was slowing, underpinning wagers that the Federal Reserve could lower borrowing costs next month.

The yen was steady at 147.26 per dollar after data showed Japan's economy expanded by a faster-than-expected annualized 3.1% in April-June, rebounding from the previous quarter due to a solid pickup in consumption.

In the U.S., data on Wednesday showed the consumer price index rose moderately, in line with expectations, and the annual increase in inflation slowed to below 3% for the first time since early 2021.

The figures add to the mild increase in producer prices in July in suggesting that inflation is on a downward trend, although traders are now anticipating the Fed to be not as aggressive on rate cuts as they had hoped.

Josh Chastant, portfolio manager for public markets at GuideStone Funds, said both the U.S. CPI and PPI data pointed to a 25 basis point cut by the Fed in September.

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