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The euro was down 0.2% against the dollar at a three-week low of $1.0773, as markets adjust rate expectations lower following soft data and dovish central bank commentary.

The Institute for Supply Management (ISM) said its manufacturing PMI was unchanged at 46.7 last month. It was the 13th consecutive month that the PMI stayed below 50, which indicates contraction in manufacturing.

Fed officials agreed they would raise interest rates only if progress in controlling inflation faltered, reiterating recent comments by policymakers that left the door open for more tightening even as markets have moved to price rate cuts from early next year.

The better than expected reading lifted the dollar, even though a weak reading on producer prices, along with Tuesdays consumer price index report, signaled a cooling economy that still suggests the Feds fight against inflation is on track.

Powell and other Fed officials said on Thursday that they are still not sure that interest rates are high enough to finish the battle with inflation, with Powell saying that the Fed may get further help in taming price increases from improvements in the supply of goods, services and labor.

The U.S. dollar fell on Monday, dropping to a two-week low against the yen, as traders looked ahead to several major central bank meetings and a slew of major economic data releases this week.

The dollar rose against the euro on Wednesday before several Federal Reserve officials were due to speak and as investors watched the war between Hamas and Israel for signs of escalation.

Data on Wednesday had shown U.S. producer prices increased more than expected in September amid higher costs for energy products and food

The Labor Departments report on Thursday showed the annual increase in consumer prices last month, excluding the volatile food and energy components, was the smallest in two years

Bostic told the American Bankers Association that Fed policy is sufficiently restrictive and that he sees no recession ahead even as the Feds rate hikes slow the economy and bring down inflation.