The dollar index, which measures the greenback against six major peers, was down 0.22 percent to 103.8637 in late trading.
The consumer price index, a closely watched inflation gauge, increased 0.1 percent month on month in November, and was up 3.1 percent from a year ago, the U.S. Bureau of Labor Statistics reported Tuesday. Excluding food and energy, the core CPI grew 0.3 percent month on month and 4 percent from a year ago. Both numbers were in line with estimates and little changed from October.
"The report was somewhat in line, although, I suppose not as good as what some might have hoped that we would start to see more deceleration on a month over month basis," said Liz Ann Sonders, chief investment strategist at Charles Schwab. "The Fed will probably talk about continued disinflation being good news."
According to the CME FedWatch Tool, a rate hike is not expected at the meeting on Wednesday, with the market betting on rate cuts likely to happen in May 2024. Ahead of the decision, U.S. Treasury yields were declining, as the 2-year rate is currently at 4.71 percent, while the 5 and 10-year yields stand at 4.25 percent and 4.23 percent, respectively.
The eurozone ZEW Economic Sentiment Index, which measures overall expert opinions on the direction of the economy, jumped to 23.0, compared to a 13.8 figure registered in November. The data surpassed expectations of 12.0. In late New York trading, the euro increased to 1.0790 dollars from 1.0762 dollars in the previous session.
British wage growth slowed by the most in almost two years, official data showed on Tuesday. The British pound was up to 1.2563 dollars from 1.2556 U.S. dollars in the previous session.
The U.S. dollar bought 145.6090 Japanese yen, lower than 146.1580 Japanese yen of the previous session. The U.S. dollar fell to 0.8757 Swiss francs from 0.8784 Swiss francs, and it was up to 1.3595 Canadian dollars from 1.3569 Canadian dollars. The U.S. dollar decreased to 10.4591 Swedish kronor from 10.4917 Swedish kronor.
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