The U.S. dollar steadied on Thursday despite the sharp fall in U.S. bond yields after Wednesday's inflation data as market focus shifted to Donald Trump's presidential inauguration and possible inflationary impact of his policies.

Meanwhile the yen rose against the dollar and the euro as investors expected the Bank of Japan to hike rates next week.

Core U.S. inflation dipped to 0.2% month-on-month in December from 0.3% in November, as expected, while the annualised 4.2% reading came below the 3.3% forecast.

Traders who have been growing more worried about inflation responded with relief, buying stocks and sending benchmark 10-year Treasury yields down more than 13 basis points.

The currency reaction was more muted.

The U.S. dollar index was up 0.05% at 109.09.

The yen rose 0.25% against the dollar , after hitting 155.21, its lowest level since Dec. 19. It was up 0.24% against the euro at 160.63.

The euro was up 0.05% at $1.0294.

Sterling dipped 0.3% to $1.2212 after softer-than-expected British inflation reading and remarks from a Bank of England policymaker saying that the time was right to bring down interest rates.

It briefly extended its fall as data showed Britain's economic output rose for the first time in three months in November but by less than expected.

Indonesia's rupiah dropped to a 6-month low following Wednesday's surprise rate cut from Bank Indonesia.

South Korea's won , meanwhile, failed to see a boost from the central bank defying expectations for a cut to leave its benchmark rate on hold at 3% on Thursday.

Source: Reuters