Dollar gains on U.S. inflation data, housing data weighs

The dollar firmed against most major currencies on Tuesday after better-than-expected U.S. inflation rates hit the wire, though soft data out of the housing sector capped the greenback's gains.

In U.S. trading on Tuesday, EUR/USD was down 0.07% at 1.3812.

The Labor Department reported earlier that the U.S. consumer price index rose 0.2% in March, exceeding expectations for a 0.1% gain, after a 0.1% uptick the previous month.

The on-year rate rose 1.5% in March, beating estimates for a 1.4% gain though still below the Fed's 2% target.

The core consumer price index, which excludes volatile food and energy items, rose 0.2% last month, beating estimates for a 0.1% increase, after a 0.1% gain in February.

The on-year core consumer prices index rose 1,7%, beating estimates for the index to remain unchanged at 1.6%.

Elsewhere, a separate report showed that the Empire State manufacturing index fell to 1.3 for April from 5.6 in March, defying expectations for a rise to 8.2.

Investors viewed Tuesday's overall data as solid enough to keep the Federal Reserve dismantling its monthly asset-purchasing program, which currently stands at $55 billion.

Monthly bond purchases by the Fed weaken the dollar by suppressing borrowing costs, sending investors to stocks in hopes in investing and hiring follow.

Soft housing data watered down demand for the greenback.

The National Association of Home Builders/Wells Fargo Housing Market Index came in at 47 for April, missing market calls for a reading of 50.

Readings below 50 mean more builders view market conditions as poor than favorable, and April's showing marked the third consecutive month of a number below that threshold.

Meanwhile in Europe, the single currency came under pressure earlier after data showed that the ZEW index for German economic sentiment fell to an eight-month low of 43.2 this month from 46.6 in March. Analysts had expected the index to decline to 45.0 in April.

The dollar was flat against the yen, with USD/JPY unchanged at 101.85, and up against the Swiss franc, with USD/CHF up 0.07% at 0.8804.

The greenback was up against the pound, with GBP/USD down 0.04% at 1.6722.

Data released earlier revealed that the U.K. consumer price index rose 0.2% in March, in line with expectations, after a 0.5% increase the previous month.

On a yearly basis, U.K. CPI rose 1.6% last month, in line with market expectations, after a 1.7% gain in February.

The dollar was up against its cousins in Canada, Australia and New Zealand, with USD/CAD up 0.16% at 1.0980, AUD/USD down 0.74% at 0.9352 and NZD/USD down 0.53% at 0.8642.

The US Dollar Index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.07% at 79.88.

On Wednesday, the U.S. is to produce reports on housing starts, building permits and industrial production.