SINGAPORE, Oct 12 (Reuters) - The dollar was rooted near
a two-week low on Thursday following minutes from the last U.S.
Federal Reserve meeting that showed policymakers taking a
cautious stance and as investors awaited key inflation data.
    The dollar index, which measures the U.S. currency
against six rivals, was at 105.67, not far from 105.55, its
lowest since Sept. 25 it touched on Wednesday. The index is down
0.4% for the week.
    Fed officials pointed to uncertainties around the economy,
oil prices and financial markets as supporting "the case for
proceeding carefully in determining the extent of additional
policy firming that may be appropriate," according to the
minutes released on Wednesday from the Sept. 19-20 meeting.
    In recent comments, Fed officials have cited rising bond
yields as a factor that may allow them to call it a day on their
rate hike cycle.
    Also keeping the mood cautious was a mixed report on U.S.
producer prices, which increased more than expected in September
amid higher costs for energy products and food. But underlying
inflation pressures at the factory gate continued to abate.
    "This (PPI data) is a reminder that the last mile of the
fight against inflation is going to be a tough one," said Ryan
Brandham, head of global capital markets, North America at
Validus Risk Management.
    The report comes ahead of the release on Thursday of
September's consumer price index data, which is expected to show
inflation moderated last month.
    A downside surprise to inflation will likely support the
case for the Fed to have finished its tightening cycle, thereby
pulling down U.S. yields and the dollar, according to Carol
Kong, a currency strategist at Commonwealth Bank of Australia.
    "On the flip side, an upside surprise will likely encourage
markets to reprice higher the chance the Federal Open Market
Committee will follow through on its projected 25 basis point
hike."
    Futures markets are pricing in a 26% chance of a 25 basis
point hike in the December meeting and a 9% chance of a 25 basis
point hike in November meeting, according to the CME FedWatch
tool.
    The dollar's recent weakness has been driven by declining
Treasury yields as bond prices rallied on the Fed's softer
stance on future rate hikes. Bond yields move opposite to their
price.
    The yield on 10-year Treasury notes was down 3.5
basis points to 4.562%.
    The euro was up 0.03% at $1.062, after touching an
over two week high on Wednesday. 
    Two influential European Central Bank policymakers said on
Wednesday the central bank has made progress in getting
inflation back down to target, but new shocks could still
require the bank to continue a now-paused tightening cycle.
    The Japanese yen strengthened 0.03% to 149.11 per
dollar, while sterling was last trading at $1.2311,
flat on the day.
    The Australian dollar rose 0.05% to $0.642, while
the kiwi fell 0.03% to $0.602.
    
    ========================================================
    Currency bid prices at 0041 GMT
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
                                              Session                                           
 Euro/Dollar                  $1.0621        $1.0620     +0.02%         -0.87%      +1.0628     +1.0619
 Dollar/Yen                   149.0950       149.2600    -0.11%         +13.61%     +149.1500   +149.0100
 Euro/Yen                                                                                     
 Dollar/Swiss                 0.9011         0.9020      +0.00%         -2.45%      +0.9018     +0.0000
 Sterling/Dollar              1.2310         1.2314      +0.01%         +1.83%      +1.2319     +1.2312
 Dollar/Canadian              1.3591         1.3593      -0.01%         +0.31%      +1.3597     +1.3588
 Aussie/Dollar                0.6416         0.6414      +0.03%         -5.88%      +0.6421     +0.6410
 NZ                           0.6016         0.6020      -0.07%         -5.27%      +0.6021     +0.6015
 Dollar/Dollar                                                                                  
                                                                                                
    
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 (Reporting by Ankur Banerjee in Singapore. Editing by Sam
Holmes)