The greenback rose against the Japanese yen to 108.37 after U.S. inflation rose more than forecast last month, adding to speculation the Federal Reserve will be less aggressive in cutting interest rates, however, the dovish FOMC minutes limited gains.

U.S. consumer prices excluding food and energy rose 2.5% in the 12 months through January, from 2.4% the prior month. The Fed minutes showed the U.S. Federal Reserve had lowered its growth forecast for 2008 to between 1.3% and 2% due to the deepening housing contraction and tight credit and indicated risks of further setbacks are troubling. Fed officials judged that low interest rates ‘were appropriate for a time’ as they cut their growth forecast and voted for the fastest easing of monetary policy in two decades last month.

ECB council member Nicholas Garganas said the ECB governing council sticks to its pledge to avert any second-round effects on consumer prices. The single currency fell briefly to 1.4614 after the release of U.S. inflation data and then rebounded to 1.4724 in late U.S. session on active cross buying in euro especially versus the Japanese yen due to the rise in U.S. stocks. The implied yield on the three-month Euribor contract expiring in June rose to 4.05% on Wednesday, from 3.98% yesterday.

The British pound tumbled from 1.9503 to 1.9363 before recovering in late U.S. session due to renewed dollar’s weakness against the euro. Commodity currencies, including Australian dollar and New Zealand dollar rebounded from 0.9112 to 0.9195 and from 0.7904 to 0.7989 as crude oil price and gold price rallied to fresh record highs of 101.32 and 945.80 respectively.

Thursday will see the release of Japan’s all industry index, trade balance, Eurozone current account, U.K. retail sales, U.S. jobless claims, Philadelphia Fed survey and leading indicators.