The dollar is trading at its lowest point in a week following the release of benign inflation data.

In Tokyo, the dollar remained close to its one-week low on Thursday following benign U.S. consumer price data and a decline in Treasury yields, prompting some investors to scale back expectations of rapid inflation acceleration.

The euro took the spotlight with anticipation building for a European Central Bank meeting later in the day. Policymakers are expected to signal their commitment to prevent a further rise in bond yields, which could negatively impact the economic outlook for the eurozone.

The dollar index, measuring the greenback against six major currencies, held steady at 91.79 after hitting a one-week low of 91.75 earlier in the Asian trading session. The data showed that U.S. core consumer price growth had slightly slowed in February.

Against the euro, the dollar was trading at $1.1932, reflecting a 0.2% loss from the previous session. Against the Swiss franc, known as a safe-haven currency, the dollar was valued at 0.9299 francs.

The recent Consumer Price Index (CPI) data served as a reminder to market participants that U.S. inflation remains relatively subdued. According to Joe Capurso, a currency analyst at Commonwealth Bank of Australia, achieving the Federal Reserve's inflation target will require significant effort, as financial markets had become too optimistic too quickly about the Fed initiating a rate hike cycle.

The dollar and U.S. Treasury yields have been steadily rising due to expectations that the Fed's loose monetary policy and fiscal stimulus will contribute to inflation. The yield on the 10-year Treasury note stood at 1.528% on Thursday after reaching a one-year high of 1.626% last week.

The focus later in the day will be on a 30-year U.S. Treasuries auction, following adequate demand for 10-year notes in Wednesday's auction, easing concerns about the market's ability to absorb increased debt required to finance pandemic-related measures.

Overall, analysts noted that sentiment towards the dollar remained fairly positive as the U.S. economy recovers from the COVID-19 pandemic and as President Joe Biden's $1.9 trillion stimulus package gained final approval in Congress.

The British pound was trading at $1.3935 after experiencing a 0.3% increase on Wednesday. The yen was the only major currency to lose ground against the dollar, falling by approximately 0.2% to 108.55 yen.

The European Central Bank (ECB) has been testing its commitment to controlling rising bond yields. Thus far, the central bank of the eurozone has refrained from substantial market intervention, and policymakers hold differing views on whether such intervention is necessary before their meeting on Thursday.

Policymakers have also expressed concerns about the strength of the euro, although recent depreciation of the currency has lowered expectations for significant policy changes.

The Australian and New Zealand dollars continued to rise against the greenback for the third consecutive session, driven by strong sentiment towards antipodean currencies, supported by increasing commodity prices and expectations of global trade acceleration.