Recasts throughout, updates with details, background on Iran-US talks, updates prices

By Chibuike Oguh

May 28 (Reuters) - The U.S. dollar fell against major currencies on Thursday following an Axios report that the U.S. and Iran have reached an agreement to extend their ceasefire, though several similar reports over the course of the three-month conflict have not resulted in an end to the war.

The dollar has swung in recent weeks, in line with the shifting outlook on the Middle East conflict, gaining when markets expect a prolonged stand-off and falling when reports signal a move toward de-escalation.

Axios reported, citing two U.S. officials, that Washington and Tehran agreed to a 60-day memorandum of understanding that would extend the ceasefire and begin negotiations on Iran's nuclear program, pending approval from U.S. President Donald Trump.

Reuters has not independently verified that report. Axios reported on similar deals in April, on May 6 and May 23 that did not yield a lasting agreement to end the war.

The euro EUR= gained 0.24% against the dollar to $1.1652. Against the Swiss franc CHF=, the dollar weakened 0.34% to 0.784.

The dollar index =USD, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.3% to 99.02, putting it on track to snap two sessions of gains following the resumption of hostilities between the U.S. and Iran.

U.S. inflation increased at its fastest pace in three years in April, driven by higher energy prices amid the war with Iran, signalling that the Federal Reserve could hold interest rates unchanged for longer.

The personal consumption expenditures (PCE) price index rose 0.4% month-on-month in April after shooting up 0.7% in March. However, core PCE inflation, which excludes food and energy prices, gained 0.2% in April on a monthly basis after advancing 0.3% in March.

U.S. economic growth for the first quarter was also revised lower.

"The combination of core PCE, which came in a little bit softer, and the growth data also coming in a little softer sends a message that perhaps that the Fed can be a little bit less aggressive with its higher-for-longer, which is somewhat risk-supportive," said Joel Kruger, market strategist at London-based LMAX Group.

"Ultimately, until we figure out a resolution to the geopolitical side and what it's going to be with inflation, it's a lot of kind of just choppy and directionless trade."

ON WATCH FOR YEN INTERVENTION

Investors are eyeing whether Japanese officials would step in again to support the yen as it trades near the 160-per-dollar psychological level.

The Japanese yen JPY= was up 0.14% against the greenback to 159.27 per dollar.

The risk-sensitive Australian dollar AUD=D3 was up 0.25% to $0.71590. The Aussie dollar remains the top-performing G10 currency versus the U.S. dollar this year, rising 7.25% year-to-date.

The New Zealand dollar NZD=D3 rose 0.4% to $0.59275, adding to gains from the prior session after the Reserve Bank of New Zealand signalled a hawkish shift.