The dollar eased back from a major high on Wednesday against major peers, ahead of U.S. consumer price data that could provide additional clues on when the Federal Reserve will end stimulus and raise interest rates or reduce the economy's growth.
The dollar index measure greenback against six rivals and slipped 0.18% to 94.358 from Tuesday, when it touched 94.563 for the first time since December 2020.
The U.S. currency weakened 0.13% to 113.465 yen, down from a three year high of 113.785 yen in the previous session
The euro climbed to $1.1551, the highest level since Tuesday of $1.1522, its lowest in nearly 15 months.
The CPI is going to be really important, so there may be a little bit of positioning ahead of that, said Joseph Capurso, a strategist from Commonwealth Bank of Australia in Sydney.
The risk is for inflation to stay high and would bring forward market expectations for the timing and pace of rate hikes, and that would support the U.S. dollar. Today, its down a little bit but I think the Dollar has more upside. The dollar rose slightly on Tuesday amid rising expectations that the Fed will announce a stimulus hike next month, with interest rate hikes following next year.
Money markets for a 50-50 chance of rate increases by July, after three Fed policymakers said overnight that the U.S. economy has healed enough to begin to reduce the central bank's asset purchase programme, including Vice Chair Richard Clarida.
A surge in energy prices has fuelled inflation concerns and stoked bets that the Fed may need to move faster to normalise policy than officials anticipated.
The CPI is the main draw on Wednesday, and has the potential to see Fed rate hike expectations move again, one way or another, said Ray Attrill, head of foreign exchange strategy at National Australia BankAustralia Bank in Sydney.
Most Fed policymakers continue to say inflation pressures will prove transitory.
Governors Lael Brainard and Michelle Bowman are among the Fed officials due to speak later Wednesday when the minutes of the September 11 meeting are also due to be released.
Sterling rose 0.19% to $1.36135, but stayed around the middle of this month's range.
The Aussie dollar climbed 0.19% to $0.73375, debating Tuesday's one-month high of $0.7384, which dropped by 0.19% to $0.73375.
Bitcoin traded around $56,200, after reaching a five-month high of $57,855, and achieved a high of $56,200 in trading.