By Rae Wee and Stefano Rebaudo
(Reuters) -The dollar slid on Thursday on heightened expectations of Federal Reserve rate cuts this year and lingering uncertainty over tariff battles.
U.S. President Donald Trump said on Wednesday he would be willing to extend a July 8 deadline for completing trade talks with countries, but added the U.S. would send out letters in coming weeks specifying the terms of trade deals to dozens of other countries, which they could then embrace or reject.
His comments followed earlier remarks from U.S. Treasury Secretary Scott Bessent that the Trump administration may offer extensions from a July trade deal deadline for countries negotiating in good faith.
Uncertainty over what comes next for global trade, alongside scant details of a framework agreement reached between the U.S. and China this week, dampened the overall mood in markets and gave investors more reasons to sell the dollar.
The broad fall in the greenback on Thursday pushed the euro to a seven-week high early in the session, before the common currency pared some gains to last trade at $1.1513.
Sterling was flat at $1.3544, while the yen climbed 0.4% to 143.95 per dollar.
Against a basket of currencies, the dollar fell to its weakest since April 22 at 98.246 and was last down 0.04% at 98.419.
U.S. Treasury yields dropped on Wednesday as the closely watched “core” consumer prices index eased some pressure on the Federal Reserve to maintain higher interest rates for longer.
Markets priced two Fed rate cuts of 25 basis points by year-end, with an 80% chance of the first move in September and 100 bps by September 2026.
However, analysts remain cautious about the inflation outlook ahead of Thursday’s release of the producer price index.
“We suspect the core Personal Consumption Expenditures Price Index (PCE) reading will prove modestly firmer, although the result will also hinge on the inputs from core PPI,” said David Doyle, head of economics at Macquarie.
“Despite the subdued figures, through year-end, we expect year-on-year core inflation to remain elevated and potentially rise as price pressures flow from recent tariff implementation.”
Barclays estimates that May core PCE inflation could register a stronger increase, of 0.22% monthly and 2.7% yearly after incorporating the CPI data.
Elsewhere, the dollar slid 0.38% against the Swiss franc to 0.8170.
The onshore yuan rose 0.1% to 7.1818 per dollar, though gains were capped by the still-fragile truce in the U.S.-China trade war and the uncertainty surrounding the next moves of the two countries.
The euro was clinging to strong gains on Thursday, having jumped against most other currencies in the previous session.
Against the yen, the common currency last dropped 0.15% to stand at 165.88 having risen to its strongest since October at 166.42 yen on Thursday.
While there was no immediate trigger behind the moves, analysts say the euro has over the past week drawn support from hawkish European Central Bank rhetoric.
Last week, the ECB cut interest rates as expected but hinted at a pause in its year-long easing cycle after inflation finally returned to its 2% target.
That contrasts with the likely resumption of a Fed easing cycle later this year, and as Trump has repeatedly called for U.S. rates to be lowered.
Trump said last week that a decision on the next Fed chief will be coming soon, adding that a good Fed chair would lower interest rates.
The euro has risen nearly 11% for the year thus far, helped in part by a weaker dollar and as investors pour money into European markets in a move away from the U.S.
(Reporting by Rae Wee and Stefano Rebaudo; Editing by Jacqueline Wong and Toby Chopra)
