Dollar moves higher but set for biggest weekly drop in four months

"The market's tentative speculation about a pause in the Fed's tightening cycle in September is surely contributing to keeping the dollar soft," ING strategists said

The dollar edged higher on Friday but was on track for its biggest weekly drop in nearly four months as traders lowered Federal Reserve rate hike expectations amid signs the U.S. central bank might slow or even pause its tightening cycle in the second half of the year.

A broad-based decline in U.S. Treasury yields, weak economic data and cautious comments by some Fed policymakers including Atlanta Fed President Raphael Bostic this week have raised the prospect that the dollar's gains premised on aggressive rate hikes may have halted for now.

"The market's tentative speculation about a pause in the Fed's tightening