By Sara Sjolin, MarketWatch , Ryan Vlastelica

Euro climbs after signs of a pickup in inflation

The U.S. dollar weakened against its major rivals on Wednesday, pulling back from a 14-year high as investors awaited minutes from the Federal Reserve's December meeting.

An account of the confab, where the U.S. central bank raised interest rates for only the second time in about a decade, are due at 2 p.m. Eastern Time Wednesday. The minutes could shed more light on the pace of interest-rate hikes and how policy makers will respond to President-elect Donald Trump and influence currency markets.

Ahead of that release, the ICE dollar index , which measures the dollar against a half-dozen rivals, dropped 0.3% to 102.91. In recentdays, the gauge has been touching levels last seen in 2002 (http://www.marketwatch.com/story/dollar-rallies-to-15-year-high-as-2016-optimism-continues-2017-01-03), with the dollar particular strong in the fourth quarter of 2016.

"We're at something of an inflection point with the dollar," said Simon Smith, chief economist at FxPro, in a note. "For the dollar to push ahead from here, we'd need to see the Fed follow through on [the] anticipated hikes, but also for Trump's bullishness on the economy to start to come to fruition," he added.

The Fed in December raised interest rates as expected, but also signaled a more aggressive approach to tightening in 2017 (http://www.marketwatch.com/story/fed-raises-interest-rates-and-adds-another-hike-to-its-2017-forecast-2016-12-14). The so-called dot plot, which illustrates officials' projections for future interest rates, showed the central bank has penciled in three rate increases in 2017 instead ofa forecast for two increases back in September.

The euro rose to $1.0437 from $1.0406 late Tuesday in New York. Inflation in the eurozone jumped to 1.1% in December, up from 0.6% in November and beating analyst forecasts.

"Despite headline inflation returning to an upward trend we expect that the ECB's preference will be to maintain the policy course it set out in December and 'look through' energy influenced price developments in coming months," said Cathal Kennedy, European economist, in a note.

The pound was at $1.2286 from $1.2232. Britain's currency has been under heavy pressure for months, even since the country voted to leave the European Union in June. It has been trading near multidecade lows since.

Elsewhere, the yen rose, with the dollar fetching Yen117.55, down from Yen117.71 late Tuesday in New York.

(END) Dow Jones Newswires

January 04, 2017 08:45 ET (13:45 GMT)

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