Asian session: The dollar was within 1 percent from a five-year high versus the yen

00:15 Australia RBA Assist Gov Debelle Speaks

00:30 Australia New Motor Vehicle Sales (MoM) November -0.7% +2.5% +1.8%

00:30 Australia New Motor Vehicle Sales (YoY) November -3.1% -0.5%

The dollar was within 1 percent from a five-year high versus the yen as the Federal Reserve begins a two-day meeting today and before data forecast to show inflation picked up November. While 34 percent of economists surveyed by Bloomberg forecast the Fed will reduce its $85 billion in monthly bond purchases at a two-day meeting starting today, futures traders bet it will keep interest rates near zero at least until the end of 2014. The consumer-price index for the U.S. rose 0.1 percent in November, following a 0.1 percent drop the previous month, economists surveyed by Bloomberg News forecast before today’s report. Excluding volatile food and fuel, the so-called core measure also rose 0.1 percent, the poll showed.

Volatility in Group of Seven currencies declined from a two-month high as traders weighed whether economic indicators are strong enough for an immediate trimming of stimulus by the Fed. The median forecast for where the greenback will trade by March rose to 103.5 yen yesterday, according to data compiled by Bloomberg.

The euro may see support in data today forecast to show German investor confidence rose to the highest level in more than four years. The ZEW Center for European Economic Research in Mannheim will probably say its index of investor and analyst expectations, which aims to predict economic developments six months in advance, climbed to 55 in December from 54.6 the previous month, according to the Bloomberg survey median. If confirmed, that would be the strongest reading since October 2009.

Australia’s dollar fell to its lowest since 2008 versus New Zealand’s as the larger nation’s central bank said in minutes of its last meeting it maintained the option to cut interest rates. While it was prudent to hold the cash rate steady in December, the board didn’t want to “close off the possibility of reducing it further,” according to minutes of the Reserve Bank of Australia’s last meeting released today. The nation’s benchmark is at 2.5 percent, in line with New Zealand’s. RBA Governor Glenn Stevens testifies to the House of Representatives Economic Committee tomorrow.

EUR / USD: during the Asian session, the pair rose to $ 1.3775

GBP / USD: during the Asian session, the pair rose to $ 1.6320

USD / JPY: on Asian session the pair traded in the range of Y102.00-10

UK inflation data due at 0930GMT (median expectation 2.1% y/y). CBI trends at 1100GMT with BOE Carney testifying to the House of Lords Economic Affiar Committee at 1530GMT. Germany ZEW at aqt 1000GMT provides the morning interest, with US inflation data at 1330GMT. However, Wednesday's FOMC seen overshadowing. Merkel expected to be sworn in as Chancellor today.