The U.S. dollar index was a touch stronger at 100.48, rising from its lowest since ⁠June 18

The U.S. dollar stabilised on Thursday after ​touching a one-month low, as soft inflation data reinforced bets that the central bank will hold off on hiking ‌rates, while latest Middle East tensions posed a risk to the outlook.

The U.S. dollar index was a touch stronger at 100.48, rising from its lowest since ⁠June 18. It had dropped 0.8% over the previous two sessions and is on track for a weekly decline.

U.S. producer prices unexpectedly dropped ​in June, in their biggest decline in 14 months, adding to evidence that inflation was easing before the latest flare-up in the Middle ​East.

The data, together with surprisingly soft consumer inflation and a slowdown in jobs growth in June, effectively ruled out a central bank rate increase at its meeting this month.

Chances of a July hike have been slashed to 10% from 45% at the start of the week, while markets still see even odds of a 25-basis-point hike ​in September and a 70% probability of one by December, according to Fed funds futures prices via CME Group.

The recent dollar weakness ​appears to be a correction from previous highs. Markets had aggressively priced in a July rate hike, which now looks somewhat overblown given that inflation ‌is ⁠cooling fast, said Bosco Wu, investment strategist at Bank of East Asia.

Further downside for the greenback will be limited, as one month of cooling data is unlikely to signal a sustained inflation slowdown that derails the Fed’s tightening bias, while the flare-up in the Middle East and elevated energy prices should also lend support, he added.