Investing.com - The dollar was trading near three-week lows on Wednesday as lackluster U.S. inflation data and diminishing expectations that Republicans will be able to push through a tax overhaul this year weighed.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.29% to 93.45 by 08:52 AM ET (1353GMT), not far from a low of 94.4, the weakest since October 26.
U.S. consumer prices barely rose in October data on Wednesday showed, adding to concerns over stubbornly low inflation.
The consumer price index rose just 0.1% on the month and 2.0% from a year earlier.
Underlying inflation also rose by just 0.1% last month and was up 1.8% for a year earlier.
At the same time another report showed that U.S. retail sales rose unexpectedly in October, indicating that consumer spending remained strong in the fourth quarter.
But the dollar remained on the defensive as uncertainty over the fate of proposed U.S. tax cuts weighed.
Senate Republicans on Tuesday indicated that their tax overhaul plan would be linked to the repeal of a key component of Obamacare, complicating efforts to pass the bill.
Growing doubts over the tax overhaul have hit the dollar in recent sessions, sending it down by more than 1% since last week.
The dollar was lower against the yen, with USD/JPY down 0.72% to 112.64 after pulling back from a high of 113.90 the previous day.
The euro was near one-month highs with EUR/USD up 0.34% at 1.1835.
Demand for the euro continued to be underpinned after solid euro zone growth data on Tuesday offered further evidence that the region’s economic recovery remains on track, supporting the European Central Bank's move to begin reducing its bond-buying program.
Last month the ECB it would keep its bond buying program in place late into next year but reduce the size of its monthly purchases, a policy shift signaling it is on track to eventually raising interest rates.
Sterling was little changed, with GBP/USD last at 1.3159 after the UK jobs report earlier Wednesday indicated that the labor market may be losing momentum and also showed that a squeeze on wages is continuing.