The greenback extended its earlier advances against most G10 currencies in New York trading on Wednesday, following the release of a closely monitored U.S. inflation indicator that largely matched expectations. The Bloomberg Dollar Spot Index climbed 0.2% to 1195.47 before paring gains to settle at 1194.56. This marked the dollar's most significant surge in nearly four weeks, driven by inflation data that bolstered expectations for the Federal Reserve to initiate rate hikes before year-end, recovering close to half of the losses incurred after Treasury Secretary Scott Bessent's unexpected move to stabilize the bond market last week.

The U.S. personal consumption expenditures price index for July rose in line with projections, while consumer spending remained flat, providing the Federal Reserve with room to maintain steady interest rates in the near term. Following the inflation release, Treasury yields edged slightly higher, as the inflation rate continues to significantly exceed the Fed's target, keeping market expectations intact for a rate increase before the end of the year.

The Australian dollar firmed 0.1% to $0.7172 against the U.S. dollar, having earlier climbed to near three-month highs on bets that the Reserve Bank of Australia will deliver another rate hike this year. Data released Wednesday showed Australia's closely watched trimmed mean consumer price index rose 3.6% year-on-year in July, surpassing the 3.5% forecast by economists. Core CPI also accelerated on a monthly basis, climbing to 0.5% from the prior month's 0.3%.

The dollar advanced 0.1% against the Japanese yen to 159.40, bringing its weekly gain to 0.3%. The yen has now weakened for three consecutive sessions, marking its longest losing streak since July 21. In other trading, the euro slipped 0.2% to $1.1652, while the British pound declined 0.4% to $1.3594.