By Sam Forgione
NEW YORK (Reuters) - The U.S. dollar traded mostly flat against the euro and yen on Tuesday after traders doubted that strong April U.S. inflation data would push the Federal Reserve to raise interest rates soon, and on uncertainty ahead of a weekend Group of 7 meeting.
The dollar initially spiked higher against the euro after data showed U.S. consumer prices recorded their biggest increase in more than three years in April as gasoline and rents rose, with the euro hitting a session low against the greenback of $1.1303 . That move was short-lived, and the euro last traded mostly flat against the dollar at $1.1318 after traders grew skeptical the data would support a rate hike from the Fed anytime soon. The dollar was last mostly flat against the yen at 108.97 yen after hitting a more than two-week high of 109.64 yen earlier.
Analysts said traders were likely awaiting a weekend G7 summit to see if Japan would succeed in convincing fellow member countries to allow its central bank to intervene to weaken the yen. That uncertainty kept trading in the dollar against the yen relatively muted, analysts said.
"The market has been waiting for the last few weeks for direction from either the Fed, the ECB or the BoJ," said Douglas Borthwick, managing director at Chapdelaine Foreign Exchange in New York. "This weekend, we should get more clarity that could lead to more volume, but in the meantime we've seen positions sidelined."
The dollar managed a 0.23 percent gain against the Swiss franc, putting it close to an earlier nearly nine-week high of 0.9803 franc.
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Dallas Fed President Robert Kaplan said Tuesday that he would advocate for an interest-rate hike in upcoming meetings, while Atlanta Fed President Dennis Lockhart and San Francisco Fed President John Williams said the Fed could still raise interest rates two or three times this year.
The commentary failed to lift the dollar.
"Talk is cheap right now," Borthwick said. "The market's now beginning to stop listening to the chatter and really not reacting until it gets the action."
Traders could also be waiting for greater clarity on the Fed's actions before betting on the dollar against the euro, said Thierry Albert Wizman, global interest rates and currencies strategist, at Macquarie Group Limited in New York.
The dollar index, which measures the greenback against a basket of six major rivals, was last down 0.05 percent at 94.522 .
(Reporting by Sam Forgione; Additional reporting by Jemima Kelly in London; Editing by Meredith Mazzilli and Chris Reese)