* China Q3 GDP in line with market expectations
* Aussie up 0.2 percent near two-week high
* Dollar falters after U.S. core CPI below expectations
(Updates prices, adds comments, details)
By Anirban Nag
LONDON, Oct 19 The dollar index was subdued on
Wednesday as Treasury yields ticked lower after U.S. consumer
prices suggested underlying inflation was moderating, prompting
investors to trim bets on an interest rate hike later this year.
The index was down 0.2 percent at 97.696, below
Monday's seven-month high of 98.169. Against the yen, it was
down 0.5 percent at 103.35 yen while the euro was
slightly higher at $1.09965.
The dollar struggled to gain traction in the wake of U.S.
inflation data on Wednesday. The core consumer price index
(CPI), which strips out food and energy costs, gained 0.1
percent last month after climbing 0.3 percent in August. The
year-on-year increase in the core CPI slowed to 2.2 percent
following a 2.3 percent rise in August.
Fed fund futures <0#FF:> imply around a 65 percent
probability of the Federal Reserve raising interest rates by
December, down from 70 percent before the CPI data.
"The U.S. data has not been great and U.S. rates have eased
on the back of that. That has seen dollar/yen come under some
pressure, but we expect some decent buying around the 103-103.50
yen level," said Yujiro Goto, currency strategist at Nomura.
The dollar also has to overcome uncertainty stemming from
the Presidential election in November. A report from currency
specialists HiFX said as investors grow wary before the
election, they are more likely to withdraw their funds, putting
downward pressure on the dollar.
EURO HIGHER BEFORE ECB
Nomura's Goto said there was a slight upside risk to the
common currency before the European Central Bank's policy
meeting on Thursday. The ECB is expected to keep its policy
unchanged with any decisions on the future of its asset purchase
scheme expected to be deferred until December.
But some traders expect ECB chief Mario Draghi to clarify
his stance on recent talk that the ECB is considering tapering
its asset purchases.
"We look for this week's ECB meeting to disappoint markets
and fail to answer any questions about what's expected to happen
to the asset purchase programme beyond March," said Jacqui
Douglas, chief European macro strategist at TD Securities.
"The December meeting is where we expect the ECB to address
the parameters of the programme, and introduce the intension to
begin tapering after March 2017."
(Additional reporting by Masayuki Kitano; Editing by Catherine