The dollar had a rough start to the week, falling to a seven-month low against a basket of significant rivals in Asian trade before stabilizing. The yen was in special focus since traders were betting that the Bank of Japan would further modify its yield control strategy.

The Australian dollar broke through the crucial $0.7000 mark for the first time since August before falling back to $0.6962, while the euro touched a new nine-month high of $1.0874 in early trade before retreating to close 0.16% lower at $1.0816.

Thanks also to early strength from sterling and the Japanese yen, the dollar index , which tracks the greenback against a basket of currencies, slumped to a seven-month trough of 101.77, extending its selloff from last week after data showed that U.S consumer prices fell for the first time in more than 2-1/2 years in December.

With decades-high inflation in the world’s largest economy showing signs of cooling, investors are now growing increasingly confident that the Fed is nearing the end of its rate-hike cycle, and that rates will not go as high as previously feared.

The Fed’s aggressive rate increases were a main driver of the dollar index’s 8% surge last year, before signs that inflation was peaking brought it back down.

The dollar has largely traded steady against most currencies since last week’s data.

“It’s too soon to imagine a significant dollar downtrend, we’ve had some dollar repricing certainly, but for broad-based dollar weakness you’ll need to really see Fed expectations roll over materially and the Fed potentially cutting rates at some point, and we are not at this point,” said Samy Chaar, chief economist at Lombard Odier.

Markets are now pricing in a 91% chance of a 25-basis-point increase when the Fed announces its policy decision in February, with a 9% chance of a 50-bp hike.

The dollar steadied in European trading, regaining ground against the pound which was last down 0.3% at $1.2195.