By Anirban Nag
LONDON (Reuters) - The dollar index was subdued on Wednesday as Treasury yields ticked lower after U.S. consumer prices suggested underlying inflation was moderating, prompting investors to trim bets on an interest rate hike later this year.
The index (DXY) was down 0.1 percent at 97.809, below Monday's seven-month high of 98.169. Against the yen, it was down 0.3 percent at 103.55 yen
The dollar struggled to gain traction in the wake of U.S. inflation data on Wednesday. The so-called core CPI, which strips out food and energy costs, gained 0.1 percent last month after climbing 0.3 percent in August. The year-on-year increase in the core CPI slowed to 2.2 percent following a 2.3 percent rise in August.
Fed fund futures <0#FF:> imply around a 65 percent probability of the Federal Reserve raising interest rates by December, down from 70 percent before the CPI data.
"The U.S. data has not been great and U.S. rates have eased on the back of that. That has seen dollar/yen come under some pressure, but we expect some decent buying around the 103-103.50 yen level," said Yujiro Goto, currency strategist at Nomura.
Goto added there was a slight upside risk to the common currency before the European Central Bank's policy meeting on Thursday. The central bank is widely expected to keep its policy unchanged with any decisions on the future of its asset purchase scheme expected to be deferred until December.
But some traders expect ECB chief Mario Draghi to clarify his stance on recent talk that the ECB is considering tapering its asset purchases.
CHINA DATA
The Australian dollar held on to recent gains after a barrage of Chinese data. China's third-quarter gross domestic product matched market forecasts, while September industrial production came in below expectations.
Hirofumi Suzuki, an economist for Sumitomo Mitsui Banking Corporation in Singapore said the data suggested Chinese authorities still have solid control over the economy and that the risks of a sharp deterioration are limited. That bodes well for the Aussie dollar in the near term, he said.
The Australian dollar last traded at $0.7670
The Aussie had gained support following comments from Reserve Bank of Australia Governor Philip Lowe on Tuesday that he was comfortable with the current exchange rate.