The dollar index slipped to 97.66 before steadying near 97.8 after US wholesale inflation data came in softer than expected, bolstering bets on rate cuts.
The producer price index fell 0.1% in August, its first decline in four months, while July’s figure was revised lower.
On an annual basis, PPI rose 2.6%.
The surprise drop eased concerns about stubborn inflation and reinforced expectations that the Federal Reserve will move ahead with easing policy.
Markets have fully priced in a quarter-point cut at next week’s meeting, with traders now anticipating up to three reductions by the end of 2025.
Investors are closely watching Thursday’s consumer price data, seen as more influential for Fed officials, particularly with tariffs potentially feeding through to households.
Core inflation, excluding food and energy, is expected to show another firm monthly rise, making the CPI release a key test of whether policymakers can balance inflation control with labor market stability.