By Richard Leong
NEW YORK (Reuters) - The dollar fell against a basket of major currencies on Friday, on track for its biggest single-day drop in three weeks, on persistent doubts whether the Federal Reserve would raise interest rates again this year due to softening inflation data.
The greenback was also broadly weaker versus commodity-linked currencies, which got a boost as global benchmark Brent futures recovered from a seven-month low.
Sterling rose for a third consecutive day following a speech by soon-to-depart Bank of England policymaker Kristin Forbes, who late Thursday urged hiking U.K. rates immediately to stem a weaker pound.
Trading volume was muted in the absence of major economic data, according to traders and analysts.
"This has been largely a week of consolidation among major currency pairings given the lack of economic data this week," said Omer Esiner, chief market strategist at Commonwealth Foreign Exchange in Washington.
The dollar index, which tracks the dollar against six major peers (DXY), fell 0.37 percent at 97.232, retreating further from a one-month peak reached on Tuesday.
The euro
The pound
The greenback rose earlier this week on comments from New York Fed President William Dudley, who said a tightening labor market would push up wages and cause U.S. inflation to reverse from its current pullback.
The U.S. Consumer Price Index has come in weaker-than-expected for three consecutive months. This raised concerns whether inflation would reach the Fed's 2 percent goal.
Traders, however, were doubtful about this premise, which would support the case for another rate increase later this year as recent U.S. data on balance have fallen short of forecast.
On Friday, Markit's flash June reports on U.S. factory and services activity was weaker than expected, while the government said new home sales rebounded more than expected in May.
"The data need to confirm the Fed's stance for another rate hike this year," Esiner said.
The futures market implied traders saw a 53 percent chance the Fed would raise rates in December
Meanwhile, commodity-linked currencies rose with a rebound in crude oil prices. Brent crude futures (LCOc1) were up 0.9 percent at $45.62 a barrel after hitting their lowest since November on Thursday.
The Australian dollar
(Additonal reporting by Jemima Kelly in Paris and Shinichi Saoshiro in Tokyo; Editing by John Stonestreet and Dan Grebler)