The dollar struggled to pull away from August lows on Wednesday as investors wondered whether the Federal Reserve would raise interest rates next month after another round of weak US data in the previous session.
Data on Tuesday showing consumer prices (CPI) fell in July for the first time since November, while industrial production rebounded less than expected, were the latest releases to suggest the US economy might be in a soft patch.
A light US data calendar on Wednesday providing nothing new to confirm or contradict Tuesday's weak figures, as well as a market that is already fairly short of dollars, resulted in only modest moves in major currencies.
"On balance the Fed will probably still raise rates but more weak data is going to cause significant doubts about that," said Chris Gothard, currency analyst at Brown Brothers Harriman.
"There's just a bit more wait and see going on in the market. People aren't so willing to be too decisive on the basis of the inflation report - they want to see more evidence about jobs and growth before they start writing off Fed rate increases."
The dollar traded nearly a quarter percent higher on the day at $1.2326 per euro by 1130 GMT, though still not far from Tuesday's four-week low of $1.2387.
It also traded at 109.97 yen, flat from late New York levels - but only after dipping as low as 109.73 earlier in the session, its weakest since July 27.
The euro briefly ticked lower after data showed eurozone July consumer prices fell by a larger-than-expected 0.2 percent from the previous month for a revised 2.3 percent increase from a year earlier.
Dealers said uncertainty over whether the Federal Reserve would raise interest rates next month was likely to persist until the publication of the US jobs report for August, which is still some weeks away.
"The data is making the market cautious about expecting continuous rate hikes out of the Fed but the dollar is absorbing this negative news, which tells you that the market is quite one-sided in its positioning," said Mansoor Mohi-uddin, chief currency strategist at UBS.
With the dollar already having suffered losses on a scaling back of US rate hike expectations, many analysts think it will now trade sideways until the impact of soaring oil prices on the global economy becomes more clear.