Dollar tumbles after cooler-than-expected U.S. inflation data

Economists polled by Reuters had forecast a 0.2% rise on the heels of a roughly 20% drop in the cost of gasoline.

The dollar index, which measures the currency's value against a basket of currencies, was down 1.128% at 105.15 at 9:00 a.m. Eastern time (1300 ).

"This is good news for FX traders, as it was a pretty clear reaction and you will probably see that there still should be some follow-through," said Edward , senior market analyst at .

The has indicated that several monthly declines in CPI growth will be needed before it lets up on the increasingly aggressive monetary policy tightening it has delivered to tame inflation currently running at four-decade highs.

"They will be debating whether it's a half-point increase, or 75 (basis points), but I think the risk of much more aggressive tightening is now off the table," said Moya.

The euro climbed 1.1% to $1.0325, sterling gained 1.17% to $1.2216, and the dollar also lost 1.12% on the Swiss franc, which traded at 0.9428 per greenback.

The greenback gained 1.38% versus the Japanese yen to 133.2 yen.

A quick reading on policymakers' reaction may come from Fed officials Charles Evans and Neel Kashkari, who were due to make speeches at 1500 GMT and 1800 GMT, though they will have another set of price data in August before September's policy meeting.

The Australian dollar, seen as a barometer of risk, was up 1.32% at $0.7054.

, rattled by a drumbeat of cryptocurrency fund wipeouts and thefts over recent months, was up 3.61% at $24,000.

(Reporting by John McCrank in New York; Editing by Mark Heinrich and John Stonestreet)