The U.S. dollar pulled back from its early highs against its most major trading partners in the European session on Wednesday, as an acceleration in U.S. inflation in April sparked fears about an earlier tightening of monetary policy than expected by the U.S. Federal Reserve.

Data from the Labor Department showed that consumer price index climbed by 0.8 percent in April after rising by 0.6 percent in March. Economists had expected consumer prices to inch up by 0.2 percent.

Excluding food and energy prices, core consumer prices also advanced by 0.9 percent in April following a 0.3 percent uptick in March. Core prices were expected to rise by another 0.3 percent.

With the much bigger than expected monthly increase, consumer prices in April were up by 4.2 percent compared to the same month a year ago, reflecting the biggest jump since September of 2008.

Core consumer prices surged up by 3.0 percent year-over-year, marking the biggest annual increase since January of 1996.

The dollar rose in the previous session, as U.S. treasury yields jumped on concerns about surge in inflation.

After rising to a 5-day high of 0.9079 immediately after the data, the greenback retreated to 0.9030 against the franc. If the greenback extends fall, 0.88 is likely seen as its next support level.

The greenback eased off to 1.2152 against the euro and 1.4153 against the pound, from a 5-day high of 1.2072 and a 2-day high of 1.4080, respectively hit soon after the data. The currency is poised to target support around 1.24 against the euro and 1.45 against the pound.

The greenback moved off slightly from its recent multi-day highs of 0.7755 against the aussie and 0.7190 against the kiwi and was worth 0.7814 and 0.7244, respectively. The greenback had ended Tuesday's deals at 0.7840 against the aussie and 0.7270 against the kiwi. The greenback is seen finding support around 0.79 against the aussie and 0.74 against the kiwi.

The greenback touched a 6-year low of 1.2046 against the loonie, falling from a 5-day high of 1.2133 seen at 11:45 pm ET. The greenback was trading at 1.2100 against the loonie at yesterday's close. Next key support for the greenback is seen around the 1.12 level.

In contrast, the greenback hit a 6-day high of 109.38 against the yen, compared to yesterday's close of 108.61. On the upside, 112.00 is possibly seen as its next resistance level.

Preliminary data from the Cabinet Office showed that Japan's leading index rose to the highest level in seven years in March.

The leading index, which measures the future economic activity, grew to 103.2 in March from 98.9 in February.

U.S. monthly budget statement for April is scheduled for release in the New York session.

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