TOKYO – The dollar fell to multi-week lows against the euro and the yen on Wednesday, after an uptick in a U.S. consumer price gauge did not spark wider fears about accelerating inflation and the Federal Reserve’s tapering, pushing down U.S. bond yields.

The dollar ticked down 0.2% to 108.80 yen, touching its lowest level in three weeks, down about 2 percent from a one-year peak hit at the end of last month.

The euro popped up 0.1% to $1.1960, hitting its highest level since mid-March, as it extended a rally from a five-month low of $1.1704 set on March 31.

Against the Swiss franc, the U.S. currency slipped to 0.9201 franc, near its lowest levels in six weeks.

While the dollar was stuck near its familiar ranges against most other currencies, the dollar’s index against a basket of six major units fell to as low as 91.724, its lowest since March 22.

The greenback’s fall came as U.S. bond yields dipped, thus reducing the currency’s yield attraction, as solid demand for a 30-year bond auction trumped rises in consumer inflation.The 10-year U.S. Treasuries yield dipped to 1.620%, also its lowest levels since late March.

The U.S. consumer price index jumped 0.6% in March versus the previous month, the largest gain since August 2012, and rose 2.6% from a year earlier, both 0.1 percentage point above market expectations.

The core CPI, which excludes volatile foods and energy, was also a tad stronger than expected, with a year-on-year increase of 1.6%.

“Inflation has been expected to accelerate in the April-June quarter. Although the latest reading was a bit stronger than expected, it wasn’t out of the blue,” said Masafumi Yamamoto, chief currency strategist at Mizuho Securities.

Speculation that firmer inflation could propel the Federal Reserve to reduce its quantitative easing and low interest rates earlier than it has pledged has been a major driver of the dollar’s rally in the first quarter.

“It seems like the markets have already priced in economic normalisation as U.S. bond yields have risen considerably, with the five-year yield almost reaching 1% at one point,” said Minori Uchida, chief currency strategist at MUFG Bank.

The U.S. central bank has said it will look through temporary increases in inflation, and analysts expect it will allow inflation to run hotter than previously expected before raising rates.

Philadelphia Fed Bank President Patrick Harker said on Tuesday it is unlikely that inflation will run out of control this year.

Elsewhere, the New Zealand dollar rose 0.4% to $0.7086 after the country’s central bank held its official interest rate and asset purchase programme steady, widely as expected.

The Singapore dollar rose 0.25% to S$1.3376 per U.S. dollar after the Monetary Authority of Singapore (MAS) left its exchange-rate policy settings unchanged.The Russian rouble gained about 2% overnight after U.S. President Joe Biden called on Russian President Vladimir Putin to reduce tensions between Russia and Ukraine.

Biden phoned Putin to propose they meet in a third country, in a sign of concern about tensions spinning out of control in the Ukraine crisis.

In cryptocurrencies, bitcoin hit a record high of $63,860.71 ahead of the listing of cryptocurrency platform Coinbase on Nasdaq later in the day. – Reuters