Sterling was struggling to recover from a sharp fall on Thursday following UK inflation data that undershot market expectations, while the dollar regained its footing after a steep decline last week that analysts said was overblown.

In Asia, markets also had their focus on China's loan prime rate (LPR) decision, where it is expected to keep the lending benchmarks unchanged after the central bank stood pat on a key policy rate earlier this week.

The British pound was last 0.02% lower at $1.2936, after tumbling more than 0.7% on Wednesday in the wake of data that showed Britain's high rate of inflation falling more than expected in June to its slowest in over a year at 7.9%.

That pulled back market expectations of further aggressive rate hikes from the Bank of England (BoE), with the prospect of UK rates rising above 6% now likely off the table.

Traders had at one point expected interest rates to rise as high as 6.5%.

Elsewhere, the euro rose 0.11% to $1.1213, as investors looked to next week's European Central Bank (ECB) policy meeting for further clarity on the rate outlook.

ECB policymakers have in recent days taken a more dovish tone, with Governing Council member Yannis Stournaras the latest to guide that future rate rises past July's likely 25 bp increase remains up in the air.

The U.S. dollar index steadied above 100 and last stood at 100.18, regaining some lost ground after last week's more than 2% fall in a knee-jerk reaction to U.S. inflation data that came in cooler than expected.

The Japanese yen rose 0.1% to 139.56 per dollar, while the Australian dollar was last 0.16% higher at $0.6782, ahead of the country's employment data later on Thursday.

Source : Reuters