NEW YORK: The dollar dropped to four-week lows on Wednesday after data showing weaker-than-expected US producer and consumer prices cemented the view that the Federal Reserve will not raise interest rates later in the day.

China’s yuan sagged to its weakest in over six months after the central bank cut rates, and as speculation mounts that more stimulus is on the way to support the sputtering post-COVID-19 economic recovery. The Fed is widely expected to hold interest rates unchanged at a range of between 5.0% and 5.25% later on Wednesday. For the July meeting, the rate futures market has priced in a more than 60% chance of a 25-basis-point hike.

In late morning trading, the dollar index, which measures the performance of the US currency against six others, fell 0.5% to 102.79, after touching its lowest since May 21 at 102.78.

The dollar index was headed for its largest two-week drop since late March, having lost about 1.2% in value in that time, as the view has taken hold among investors that, while the Fed may be close to the end of its current course of rate hikes, other central banks have further to go.

The Reserve Bank of Australia and the Bank of Canada last week delivered surprise rate rises, while the chances for the Bank of England to deliver a half-point rise when it meets next week have reached 20% after shock wage-growth data on Tuesday.

The euro has been steadily clawing back from 2-1/2-month lows in late May and was last up 0.5% at $1.0845. The European Central Bank (ECB) delivers its decision on rates on Thursday, with a quarter-point hike to 3.50% widely expected. Sterling rose 0.6% against the dollar to $1.2686, after earlier hitting its highest since April 2022 of $1.2691.