Anna 
The dollar slipped to a one-month low against the euro on Wednesday, driven by lower Treasury yields as investors awaited a pivotal U.S. inflation report that could influence Federal Reserve policy decisions.
Meanwhile, the yen remained near a two-week low due to a persistent yield gap between Japanese bonds and U.S. counterparts, which continued to encourage selling of the Japanese currency.
During Asian trading hours, the euro inched up by 0.03% to $1.0823, briefly touching $1.0828 for the first time since April 10.
The U.S. dollar index, which measures the dollar against six major currencies with a strong euro weighting, eased by 0.11% to 104.94, after hitting a 1-1/2-week low of 104.92 earlier.
The benchmark U.S. Treasury yield declined to 4.4414%, extending an overnight retreat of 3-1/2 basis points.
According to a Reuters poll, Wednesday’s core consumer price index (CPI) report is anticipated to show a 0.3% increase in April, down from 0.4% growth the previous month.
Deutsche Bank strategist Alan Ruskin highlighted the rare consensus among analysts’ forecasts at 0.3%, emphasizing that market reactions would hinge significantly on deviations from this expectation.
Federal Reserve Chair Jerome Powell’s optimistic outlook on Tuesday regarding the U.S. economy, projecting sustained growth and confidence in easing inflation despite recent data fluctuations, also influenced market sentiment.
In response to higher-than-expected consumer prices earlier this year, market expectations for the pace of Fed rate cuts have been revised downward to approximately 45 basis points for the year.
While the dollar experienced broad weakness against most currencies overnight, it continued to strengthen against the yen, edging back to 156.245 yen on Wednesday.
In contrast, Japanese long-term yields stand at just 0.955%, despite increasing hawkish rhetoric from the Bank of Japan and prospects of a rate hike in June.
A surge in the dollar to a 34-year high against the yen on April 29 prompted aggressive yen buying believed to be coordinated by the BOJ and Japanese finance ministry.
Elsewhere, the yuan rebounded from a two-week low against the dollar following reports of potential measures to address China’s housing surplus, offsetting concerns over U.S. tariff increases on Chinese goods imposed by President Joe Biden.
Antipodean currencies also benefited from optimism related to China, with the Australian dollar rising by 0.32% to $0.6648 and the New Zealand dollar climbing 0.37% to $0.6062.
