The dollar was last up 0.3% at 0.9660 francs, while the euro was trading marginally higher at 1.1339 francs.
The dollar index .DXY , which measures against a basket of currencies, fell 0.05 percent.
Economists polled by Reuters had forecast the CPI rising 0.2 percent in July and climbing 1.8 percent year-on-year.
North Korea's apparently rapid progress in developing nuclear weapons and missiles capable of reaching the USA mainland has fuelled tensions that erupted into a war of words between Washington and Pyongyang this week, unnerving regional powers and global investors. "It shouldn't surprise that it's going to rally a little bit on this increased tension", said Bechtel.
All three USA stock market indices were down Wednesday morning.
"U.S. markets had previously been becalmed amidst the Goldilocks scenario of strong profit growth, low interest rates and full valuations". "It's hard to tell whether this could trigger a stronger bout of risk aversion".
Against the tense backdrop, the South Korean won extended its losses on Thursday and touched its lowest level against the dollar in about a month.
Mattis says USA wants diplomatic solution for N. Korea
Earlier, President Donald Trump said North Korea should be "very, very nervous" if it acted against the US. "... Mattis said the State Department would continue to try to solve the problem without violence.
The dollar hit a new eight-week low against the yen after the data, dropping to as low as 109.32 yen.
Japan is the world's biggest creditor country and there is an assumption that investors there will repatriate funds in a crisis.
The flight-to-safety into U.S. Treasuries also abated overnight. In bond markets, 10-year US Treasuries and Germany's ultra-safe government bonds were trading at their highest prices since June.
"Our outlook anticipates a continued moderate growth trend, with some further strengthening in the labor market and an increase in inflation over the medium term toward our objective of 2 percent", Dudley said in prepared remarks that did not specifically mention monetary policy. The dollar index was slightly up though at 93.62.
US gold futures for December delivery was mostly unchanged at $1,290.50 per ounce.
Crude oil prices tumbled on the back of the selloff on Wall Street and lingering concerns over global oversupply.
They were down 0.7 per cent at US$48.24 per barrel, on track for a weekly loss of 2.7 per cent.
Global benchmark Brent LCOc1 was marginally lower at $51.88, after Thursday's 1.5 percent drop. It is poised to end the week down 1.7 per cent.