The dollar moved in a narrow range during trading on Thursday, after a subdued overall reading of US inflation prompted traders to reduce their bets on the Federal Reserve raising interest rates in September.

In trading, the dollar index fell by 0.1% to 99.89 points by 11:28 GMT.

The dollar is still up 0.4% since the start of the week against a basket of major currencies, heading towards its first weekly gain in three weeks.

Inflation data

Data released on Wednesday showed that U.S. consumer prices rose 0.1% in July, in line with economists' expectations, prompting markets to lower the probability of an interest rate hike in September to 40%, compared to 54% a week earlier, according to CME Group's FedWatch tool.

Attention is now turning to the Producer Price Index (PPI), a measure of wholesale inflation, with economists polled by Reuters expecting it to slow to 4.9% in July from 5.5% in June.

This comes ahead of the release of the core personal consumption expenditures (PCE) index on August 26, a measure traditionally used by the Federal Reserve as a key indicator of inflation.

Although Federal Reserve Chairman Kevin Warsh has indicated a preference for other indicators, markets will continue to be guided for the time being by data from the Consumer Price Index, Producer Price Index, and Core PCE, according to analysts.

Japanese Yen

The dollar edged down slightly against the yen to around 159.4 yen, remaining about 2.7% below its 40-year high of nearly 164 yen, which it reached in late July and which prompted a historic joint intervention by the United States and Japan.

Shusuke Yamada, head of currency and interest rate research in Japan at Bank of America, said that investors can only assess the extent of the Japanese authorities' commitment to defending the yen through dollar-yen price movements, along with the monetary policy response that may follow those movements.