By Chibuike Oguh
NEW YORK, Sept 30 (Reuters) - The dollar retreated against major currencies on Wednesday following data showing a smaller-than-expected increase in US inflation, which reduced market bets on an interest rate hike from the Federal Reserve.
US Commerce Department data showed that the Personal Consumption Expenditures Price Index, the Fed's preferred inflation gauge, rose 0.3% last month. Economists polled by Reuters had forecast an increase of 0.4%.
The dollar has been strengthening in tandem
with rising US Treasury yields on growing expectations of more Fed rate hikes amid inflation driven by higher oil prices.
But the dollar pared recent gains against the euro following the data while US Treasury yields fell across the board, with the 2-year note yield, which typically moves in step with Fed rate expectations, down 5.82 basis points to 4.831%.
The euro rose 0.19% to $1.1361. The single currency is still headed for a monthly loss against the dollar after two consecutive months of gains.
The dollar also weakened 0.31% to 156.79 yen and was down 0.05% versus the Swiss franc.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro,fell 0.23% to 101.17. It is still headed for a monthly gain in September, snapping two straight months of losses.
(Reporting by Chibuike Oguh in New York. Editing by Mark Potter)
