The dollar hit one-week lows against the euro and yen on Thursday, having fallen sharply the previous day when tame US inflation data boosted expectations the Federal Reserve will keep interest rates on hold.
Weaker-than-expected July core consumer prices, following soft producer prices data, reinforced expectations the Fed might pause again in September having left rates steady this month.
"The probability that's priced in for another US rate hike has fallen after the release of PPI and CPI data," said Sonja Marten, currency strategist at Dresdner Kleinwort.
She also cited weak industrial production numbers on Wednesday plus some weakness in the housing sector that had confirmed fears the US is facing a consumer-led slowdown.
By 1150 GMT, the dollar was down 0.4 percent at 115.30 yen, off a one-week low of 115.20, and was 0.3 percent lower at $1.2882 per euro.
The euro was down 0.1 percent at 148.55 yen having hit a record high near 149 on Wednesday. Investors await the Philadelphia Fed business activity survey for August and a speech by Dallas Fed President Richard Fisher due later.
Fisher said on Wednesday inflation was still the greatest risk to the US economy and policymakers would not hesitate to raise interest rates again if data showed it to be necessary.
Euro gains against the dollar were trimmed briefly after final euro zone July inflation came in below expectations, but the data was not expected to shift expectations for further European Central Bank monetary tightening this year.
Euro zone consumer prices rose 2.4 percent year-on-year in July, slowing from 2.5 percent in June and below the initial estimate of 2.5 percent.
The figure is still above the ECB's inflation tolerance threshold of below but close to 2 percent.
Bank of America analysts said in a research note that unlike the United States, the euro zone still enjoys the "Goldilocks" combination of satisfactory growth and subdued inflation.
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