The dollar index traded around 99.9 on Friday, lacking a clear direction as subdued US inflation data prompted traders to dial back expectations for a Federal Reserve rate hike in September. Data released Thursday showed US producer prices rose less than expected in July, providing further evidence that price pressures are not broadly accelerating following Wednesday’s tame CPI report. Moderating inflation reduces pressure on the Fed to raise interest rates in the near term, with markets now pricing in around a 35% chance of a 25 basis point rate hike in September, down from 55% a week earlier. The latest figures also suggest that the initial inflationary impact of the Middle East conflict and higher energy costs may be fading. However, uncertainty over a potential deal to end the wat and reopen the Strait of Hormuz continues to pose risks to the inflation outlook.