The dollar fell to a six-month low against the euro after the inflation data. The euro hit $1.0673, the highest level since June, and was later trading 0.9% higher at $1.0631.
Against the yen, the dollar fell to a one-week low of 134.67 and was trading at 135.55 yen in the afternoon, down 1.5%.
The dollar index, which measures the value of the US unit against six major currencies, fell 0.9% to 104.02 units.
US consumer prices rose less than expected for a second straight month in November, resulting in the smallest annual rise in inflation in nearly a year and giving the Fed all the more reason to start cutting the size of its interest rate increases this month.
The report supported widespread expectations of a smaller 50 basis point Fed rate hike when the central bank announces its decision on Wednesday. Fed funds rate futures have also factored in a lower terminal rate of 4.8%, which is expected to hit in May.
The dollar also posted heavy losses against the currencies of commodity-exporting countries.
The Australian dollar was up 1.6% against the greenback at $0.6850. The New Zealand dollar gained 1.3% to $0.6462.
Source: Ambito
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