The dollar pared losses versus the euro on Wednesday after the U.S. Labor Department said core prices, excluding food and energy, were unexpectedly flat last month, signaling that inflation remains in check.

The U.S. currency was little changed, however, versus the Japanese yen before the Federal Reserve completes its monetary policy meeting later in the session. Currency analysts expect no change to the central bank's commitment to keep interest rates for some time, though its assessment of the economy is likely to be upgraded.

The dollar index (DXY), which tracks the greenback against a trade-weighted basket of six major counterparts, fell to 76.802, compared with 77.022 in late New York trading on Tuesday, when it touched the highest in more than two months.

The euro bought USD1.4550, up from USD1.4531 on Tuesday.

The dollar traded at JPY89.68, compared with JPY89.64 late Tuesday.

The U.S consumer price index rose 0.4% in November from a month earlier, pushing it up 1.8% in the past year. November's data marked the first positive year-over-year gain for the CPI since February.

A separate report showed U.S. housing starts rose to a 574,000 pace in November.

Still another report showed the current account deficit widened in the third quarter.

Market expectation

EURUSD picking up chatter of stops atop USD1.4585 earlier high, though supply remains at USD1.4600.

USDJPY eased lower for trade to JPY89.60 area as the dollar gave up some modest ground elsewhere and as chatter continues to reiterate the stack of exporter supply positioned around JPY90.00 area. Flows remain light, though some model-accounts were seen buying dollar under JPY89.50, traders say. Interesting to hear chatter from a couple of different traders in recent days noting the apparent lack of appetite from Japanese players to actively invest overseas, outside of a few select BRIC assets, is expected to give exporters the upper hand for now as they extend hedging programs.

Pound begins to build above USD1.6370, with traders noting that supply from Luxembourg banks between USD1.6350/70 had been keeping a lid on upside pressure. Further resistance seen placed to USD1.6380 ahead of USD1.6400. This latter level said to hold the strike of a decent sized expiry for the 1500GMT cut.

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