The dollar dropped on Wednesday as a result of stronger-than-anticipated producer pricing data that revealed underlying inflation eased slightly more in September, adding support to the market's view that the Federal Reserve has reached the end of its interest rate hike cycle.

Following an unrevised 0.7% increase in August, the producer price index (PPI) for final demand increased by 0.5%. According to Reuters' poll of economists, the PPI will increase by 0.3%. The PPI grew 2.2% over the previous 12 months after increasing by 2.0% in August.

Another drop in Treasury rates contributed to the dollar's weakness as bond prices increased as a result of the Fed's recent dovish stance on rate rises. Bond yields follow a different path than their price.

Additionally, investors are closely monitoring the Israeli-Hamas confrontation, which earlier in the week sparked safe-haven market movements.

The dollar index that gauges the major pairs hit two weeks low at 105.550.

EUR/USD advanced by 0.17% at $1.0624.

GBP/USD touches three weeks peak by 0.2% at $1.2337.