By Michael Connor
NEW YORK (Reuters) - The dollar dipped and Wall Street equities treaded water on Wednesday as global markets puzzled over the odds Federal Reserve Chair Janet Yellen will soon strike a more hawkish tone on monetary policy.
Prices of U.S. Treasuries took back losses from Tuesday, when data showed American inflation running at an unexpectedly high 2 percent a year, and were up ahead of a Federal Open Market Committee policy statement and Yellen news conference scheduled for later on Wednesday.
"We are seeing a lot of caution ahead of the FOMC," said Sireen Harajli, currency strategist at Mizuho Corporate Bank in New York. "We see some modest pressure on the dollar."
The dollar index that gauges the greenback against the euro, Japanese yen and four other currencies dipped 0.13 percent to 80.523 <.DXY>.
U.S. stocks were little changed after a three-day winning streak for the S&P 500 index as investors largely shrugged off mounting tensions in Iraq.
The Dow Jones industrial average <.DJI> fell 25.07 points or 0.15 percent, to 16,783.42, the S&P 500 <.SPX> gained 0.14 points or 0.01 percent, to 1,942.13 and the Nasdaq Composite <.IXIC> dropped 2.23 points or 0.05 percent, to 4,335.00.Adobe Systems
Trading in Treasuries also focused on Fed policy and prices rose after the Bank of England released minutes from its policy meeting that were less hawkish than expected.
Investors, who had been surprised last week when Bank of England Governor Mark Carney said Britain could become the first major economy to tighten monetary policy since the 2008 financial crisis, got comfort from the Bank of England minutes highlighting a need to lift rates gradually.
"The minutes were less hawkish than what Carney said last week,” said Tom Tucci, head of Treasuries trading at CIBC in New York.
Benchmark 10-year notes rose 6/32 in price to yield 2.63 percent, down from 2.65 percent late on Monday. Intermediate-dated debt also outperformed, with five-year notes gaining 5/32 in price to yield 1.72 percent, down from 1.75 percent.
The risk of a faster U.S. policy tightening was high enough to keep European stocks from hitting new multi-year highs.
The FTSEurofirst 300 <.FTEU3> index of top European shares was off 0.04 percent at 1,387.10.
In other markets, Brent crude oil
(Editing by Chizu Nomiyama)