* Trump admin seeking ways to penalize currency manipulators
* Dollar index falls from 9-day high
* Euro hits 9-day low vs dollar, nearly 4-week low vs sterling
* Sterling hits session high after report (Updates to midday trading, adds data)
By Dion Rabouin
NEW YORK, March 30 (Reuters) - The dollar was flat on Thursday after weak reports on euro zone inflation took the edge off news that U.S. President Donald Trump's administration was studying ways to "penalize currency manipulators" to fulfill a campaign pledge.
According to CNBC, the Trump administration is "assessing the scope of its power to penalize countries whose currencies it believes are undervalued," which could drive the dollar lower. The report provided no details about how the administration would do this.
While campaigning, Trump promised to label China a currency manipulator on his first day as president, but so far has taken no action.
The dollar index, which tracks the greenback against six major currencies, erased its gains for the day after the report, falling from a nine-day high.
However, it largely retraced the move not long after. The index was last up 0.1 percent at 100.11.
"This is really just a bit more jawboning from the (Trump) administration and them trying to move the dollar in the direction that they want it to go," said Mark McCormick, North American head of FX strategy at TD Securities.
"That’s been their operating mandate. They believe the dollar is too strong."
The British pound gained strongly against the dollar after the report, rising 0.7 percent to a session high of $1.2525. The dollar fell to its lows of the day against the Swiss franc, dropping to 0.995 franc.
The euro fell to its lowest since March 21 against the dollar and lowest since March 3 against sterling.
German and Spanish consumer inflation slowed more sharply than expected in March, prompting worries that sluggish growth in the euro zone could persist.
The inflation numbers compounded a Reuters report on Wednesday citing sources close to the European Central Bank who said officials there were unhappy with a shift in market expectations toward tighter monetary policy and higher euro zone interest rates.
"That sort of off-the-record briefing that came through yesterday and German inflation this morning do seem to have pulled the rug from under the euro," said Nick Parsons, a strategist with National Australia Bank in London.
Month-end flows, solid U.S. data and technical positioning also kept the dollar rangebound, analysts said.
The Commerce Department earlier reported that U.S. gross domestic product grew faster than previously reported in the fourth quarter last year thanks to robust consumer spending. (Reporting by Dion Rabouin; Additional reporting from Patrick Graham in London; Editing by Dan Grebler and David Gregorio)