NEW YORK/MILAN, April 9 (Reuters) - The dollar was little changed on Tuesday, trading in narrow ranges, with investors cautious ahead of U.S. inflation data, even as the yen hovered near multi-decade lows, keeping traders on alert for any possible action from Japan to prop up its currency.
Economists expect the headline consumer price index (CPI) to have risen 0.3 on a monthly basis, compared with 0.4% in February, according to a Reuters poll. Core CPI is also expected to rise 0.3% for the month of March.
Ahead of the CPI data due on Wednesday, the U.S. rate futures market has raised the odds of a June rate cut to 57.6%, up from 49% late on Monday, the CME's FedWatch tool showed.
For 2024, the fed funds futures has priced in about 65 basis points (bps) in cuts, or less than three rate decreases of 25 bps each.
The U.S. dollar ended last week lower as traders digested mixed economic data, including an unexpected slowdown in U.S. services expansion and U.S. job growth exceeding expectations.
"What's interesting to me is how soft the dollar has been. We were not able to sustain the momentum after the strong jobs data," said Marc Chandler, chief market strategist, at Bannockburn Global Forex in New York.
He noted the dollar has not found much traction ahead of the CPI data and despite adjustments on the interest rate outlook.
"To me this is a warning that if the dollar is not rallying on the back of the interest rate outlook and the stronger economic data, something is amiss."
In late morning trading, the dollar index , which tracks the currency against six major peers, was flat at 104.15.
"After upside surprises, there is an understandable caution over a potential weaker print that would quickly see June rate cut expectations increase again," Derek Halpenny, head of research global markets at MUFG Bank, said.
Meanwhile, the Fed kept sending hawkish signals.
Dallas Fed President Lorie Logan argued on Friday, after jobs data, against imminently easing monetary policy, while Bank of Chicago President Austan Goolsbee said on Monday the Fed must weigh how much longer it can maintain its rate stance without damaging the economy.
Some analysts said geopolitical risk might increase demand for safe-haven assets, including the U.S. dollar.
Hopes of a ceasefire in Gaza diminished after Hamas said Israel's proposal that it received from Qatari and Egyptian mediators did not meet Palestinian factions' demands.
In other currencies, the dollar slipped 0.1% to 151.715 yen , not far from a 34-year high of 151.975 yen hit last month as Japanese officials continued trying to talk up the currency.
The threat of intervention has kept the dollar from breaching the closely watched 152 yen level.
"While a break of 152.00 may not trigger forex intervention immediately, we would see a strong chance of the Ministry of Finance (MoF) acting to prevent a move to 155.00," said Jane Foley, senior forex strategist at RaboBank.
"Strong U.S. inflation data and soft Japanese economic numbers would increase the risk of the MoF being forced into taking action," he added.
Also on Tuesday, Bank of Japan Governor Kazuo Ueda said the central bank must consider reducing monetary stimulus if inflation accelerates.
The euro was flat to slightly lower at $1.0854, while sterling was at $1.2669, up 0.1% on the day.
Investors are also looking to the European Central Bank meeting on Thursday. Analysts expect the ECB to hold rates this week, while reiterating its decisions will remain data-dependent.
Reporting by Gertrude Chavez-Dreyfuss in New York and Stefano Rebaudo in Milan; additional reporting by Dhara Ranasinghe and Rae Wee; Editing by Jamie Freed, Barbara Lewis and Josie Kao
