Investing.com - The dollar trimmed gains against the other major currencies on Wednesday, despite the release of strong U.S. housing sector data, as investors grew cautious ahead of the Federal Reserve's highly anticipated policy decision due later in the day.
USD/JPY was up 0.17% at 121.89, after rising to highs of 122.11 earlier in the session.
The U.S. Commerce Department said that housing starts jumped 10.5% to hit 1.173 million units last month from October’s total of 1.062 million units. Analysts had expected a rise 6.6% to 1.135 million.
Meanwhile, the number of building permits issued rose by 11.0% to 1.289 million units from October’s total of 1.161 million, easily surpassing market expectations for a decline of 1.0% to 1.150 million units.
Most investors expect the U.S. central bank to raise interest rates for the first time since June 2006 at the conclusion of its meeting on Wednesday.
EUR/USD was steady at 1.0927, off session lows of 1.0913.
Eurostat reported earlier that euro zone consumer price inflation rose 0.2% last month, up from a preliminary estimate of 0.1%. Euro zone inflation rose by 0.1% in October.
The rate has now been below 1% for 26 straight months, well under the European Central Bank's target of near but just under 2%.
The report came after research group Markit said its Flash Euro Zone Composite Output Index, which measures the combined output of both the manufacturing and service sectors, eased down from 54.2 in November to 54.0 in December, below forecasts for 54.2.
Earlier Wednesday, Markit said its preliminary German manufacturing PMI inched up to 53.0 this month from a final reading of 52.9 in November, while the preliminary services PMI dipped to 55.4 from 55.6.
Elsewhere, the dollar remained higher against the pound, with GBP/USD down 0.15% at 1.5017, while USD/CHF eased 0.10% to 0.9904.
Sterling weakened after the Office for National Statistics said average earnings, excluding bonuses, rose just 2.0% in the three months to October, slowing from growth of 2.4% in the previous month.
Wages, including bonuses, rose 2.4% down from 3.0% in the previous month.
The U.K. unemployment rate fell to 5.2%, the lowest level since January 2006, from 5.3% in the three months to September.
The number of people unemployed fell by 110,000, the biggest decline since the three months to September of last year, the ONS said.
The Australian dollar was steady, with AUD/USD at 0.7196, while NZD/USD fell 0.21% to 0.6750.
Meanwhile, USD/CAD added 0.17% to trade at 1.3758, just below Monday's 11-1/2 year peak of 1.3781.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was steady at 98.28.