The euro fell versus the dollar after German inflation data led investors to increase their bets on the European Central Bank interest rate easing cycle.
Inflation fell in six important German states in August, preliminary data showed on Thursday, suggesting that national inflation could decline noticeably this month.
Spain's inflation fell to its slowest pace in a year.
The single currency dropped 0.4% to $1.1077, having traded at $1.1128 before the German figures. It hit a 13-month high on Friday at $1.1201.
Money markets priced in 67 basis points of ECB rate cuts in 2024 , from around 63 bps before the data.
Investors now await Friday's release of the U.S. core personal consumption expenditures (PCE) price index — the Federal Reserve's preferred measure of inflation — which could provide clues about the rate outlook in the U.S.
They were cautious on the single currency ahead of elections in Germany's three eastern states as two parties - one far-right and one economically far-left - are polling together between 40% and 50%.
In the broader market, the dollar rose after the German data, after bouncing on Wednesday.
The greenback has fallen some 2.9% for the month thus far , putting it on track for its steepest monthly decline in nine months.
Markets have fully priced in a 25 basis point rate cut from the Fed next month, with a 34.5% chance of an outsized 50 bp reduction, according to the CME FedWatch tool.
The dollar index was last 0.28% higher at 101.29, having fallen to a 13-month low of 100.51 on Tuesday.
The Australian dollar hovered near an eight-month top, gaining 0.27% to $0.6803.
The yen was little changed at 144.67 per dollar and was eyeing a 3.7% gain for the month.
Policymakers at the Bank of Japan (BOJ) have signalled that the central bank would continue to raise interest rates if inflation stayed on course.
Source : Reuters
