The U.S. dollar weakened against its major counterparts in the European session on Thursday, although hawkish comments from Federal Reserve officials limited the losses in the currency.

Overnight data showed that U.S. inflation eased to 8.5 percent year-on-year in July from 9.1 percent in June, in an indication that price pressures are beginning to moderate sooner than expected.

Expectations for an outsized 75 basis-point hike at the September meeting have reduced significantly following the softer-than-expected inflation reading and traders are now pricing in a 50 basis-point move.

But Fed policymakers remarked that the central bank would continue to raise interest rates aggressively despite indications of cooling inflation.

In an interview with the Financial Times, San Francisco Fed President Mary Daly did not reject another 75 basis-point hike at the central bank's next policy meeting in September, although she indicated that a 50 basis-point move was her "baseline".

The greenback dropped to 1.0341 against the euro and 1.2245 against the pound, off its early highs of 1.0275 and 1.2182, respectively. The greenback is seen finding support around 1.06 against the euro and 1.24 against the pound.

The greenback edged down to 1.2757 against the loonie and 132.43 against the yen, from its previous highs of 1.2792 and 133.31, respectively. The greenback is poised to challenge support around 1.25 against the loonie and 119.00 against the yen.

The greenback touched 0.9391 against the franc, its lowest level since April 14. If the currency slides further, 0.90 is likely seen as its next support level.

Retreating from its prior highs of 0.7063 against the aussie and 0.6384 against the kiwi, the greenback weakened to 0.7109 and 0.6429, respectively. The currency is likely to locate support around 0.73 against the aussie and 0.66 against the kiwi.

Looking ahead, U.S. producer prices for July and weekly jobless claims for the week ended August 6 will be published in the New York session.

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