By William L. Watts

The U.S. dollar and the Japanese yen lost ground Wednesday as positive second-quarter earnings surprises dented safe-haven demand for the low-yielding currencies.

A pair of U.S. economic reports that showed consumer prices rose in line with expectations in June and a New York manufacturing index rose more than expected put further pressure on the dollar.

Traders will also key in later on to the minutes of the Federal Reserve's last monetary policy meeting.

According to Barclays Capital, the minutes should reflect the central bank's rising confidence about the economy and less worries about deflation, as reflected in the statement released after that meeting.

Meanwhile, markets will parse the minutes for more clues on where the Fed stands on its purchases of Treasury bonds, which it initiated this year to keep interest rates down and encourage borrowing. The Fed opted not to increase the size of the program at the last meeting.

"The discussion surrounding the decision not to raise the size of the Treasury purchase program may be useful in gauging the likelihood that the Fed will increase the program at upcoming meetings," said Steve Englander, currency strategist at Barclays, in a note.

Meanwhile, major currency pairs remained range-bound and continued to take short-term trading cues from the equity markets, traders said.

U.S. stocks rose on Wall Street, with the Dow Jones Industrial Average (DJI) up by more than 120 points in early trade. European equities and Asian stocks also rose.

The dollar index (DXY), which tracks the greenback against a trade-weighted basket of six major rivals, was at 79.462, compared to 80.185 in North American trade late Tuesday afternoon.

The tone in equity markets was set by chip giant Intel (INTC), which rose 7%. Intel reported a second-quarter loss after the U.S. market close Tuesday, with results hit by a fine from the European Union. Excluding the penalty, however, results beat forecasts.

Financial markets will continue to digest Tuesday's releases, while looking forward to earnings from J.P. Morgan Chase (JPM), Citigroup (C) and Bank of America (BAC), later this week, said Jessica Hoversen, a currency strategist at MF Global Research in Chicago.

While strong earnings from Goldman Sachs (GS) on Tuesday morning and the Intel earnings after the close encouraged risk taking, results from Yum Brands (YUM) and Altera (ALTR) were less positive, she noted.

"The greater driver of the trade will be the outlook for growth," Hoversen said.

Consumer prices in check

The euro bought $1.4092, up from $1.3933 late Monday.

Annual consumer price inflation in the 16-nation euro zone fell 0.1% in June after a flat reading in May, marking the first time inflation had turned negative since the launch of the euro a decade ago, the European Union statistics agency Eurostat confirmed Wednesday.

The figure matched a preliminary estimate released last month.

The euro posted little significant reaction to the data.

The British pound, meanwhile, rose 0.4% versus the U.S. dollar to trade at $1.6387, tracking the stronger tone in financial sector stocks.

The Office for National Statistics painted a mixed but generally gloomy picture of the U.K. labor market. The data showed the number of people claiming jobless benefits rose at its slowest pace in more than a year in June, but also showed the overall unemployment rate rose to its highest level since January 1997 in the three months ending in May.

"Sterling initially softened on the news, but cable [the British pound vs. the U.S. dollar] continues to hold above last night's close and well within the confines of its range," said Jane Foley, research director at Forex.com.

Currency markets had a muted reaction to news that the Bank of Japan decided at its two-day policy meeting that concluded Wednesday to extend its special liquidity-boosting measures for an additional three months to support the recovery.

The dollar was at 93.52 yen, compared with 93.24 yen Tuesday.

The Bank of Japan left its overnight call rate unchanged at 0.1%, as was widely expected.