Dollar calm ahead of inflation test, Fed decision
Federal Reserve's updated interest rate projections due later in the day.
Ahead of those crucial events, markets got a fresh check on the state of China's economy.
Data showed consumer inflation rose at a steady pace in May, while producer price declines narrowed slightly, adding to signs that government efforts to prop up the economy were starting to bear fruit.
The offshore Chinese yuan firmed slightly versus the greenback to 7.2697.
The dollar index, which measures the greenback against a handful of other major peers, was little changed at 105.26, after touching its strongest level since May 14 at 105.46 overnight.
The U.S. dollar has rebounded after Friday's stronger-than-expected jobs report raised the prospect of inflation remaining sticky while growth stays strong, making the U.S. central bank less likely to cut rates in the coming months.
Markets are pricing in a roughly 56% chance of a cut in September, according to the CME FedWatch tool, down from 77.8% one week ago.
Investors will have a chance to assess the inflation situation when U.S. Consumer Price Index numbers are released at 1830 GMT on Wednesday, just hours before the Fed concludes its two-day policy meeting.
Economists polled by Reuters expect headline consumer price inflation to ease to 0.1% from 0.3% last month, and core price inflation to remain steady on the month at 0.3%.
Meanwhile, the Fed is widely seen holding rates at 5.25% to 5.5%, putting the focus on policymakers' updated economic projections known as the «dot plot» and Chair
