The dollar was trading flat as it recovered some ground after falling on Wednesday's lower-than-expected U.S. core inflation data. Investors remain prudent about aggressively selling the dollar even though markets have brought forward expectations for the next Federal Reserve interest-rate cut,

The Indian rupee is likely to open marginally higher on Wednesday as the dollar retreats in the lead up to U.S. inflation data that will give cues on the direction of U.S. interest rates.

European stock markets experienced a strong rally following cooling inflation data from the UK and the US on Wednesday. However, the weakness in the euro and the pound sterling may persist due to the ongoing economic and political uncertainties.

The dollar fell to a one-week low as investors turned cautious ahead of U.S. inflation data later. U.S. inflation is expected to accelerate to 2.9% year over year in December but core inflation is seen unchanged at 3.

On Wednesday, a strong dollar rally slowed down as traders were a little more cautious. They awaited a crucial U.S. consumer inflation report that was expected later in the day, keeping investors from making their big moves.