FOREX-Dollar softer, investors ponder December Fed rate hike view

* China Q3 GDP in line with market expectations

* Aussie up 0.2 percent near two-week high

* Dollar falters after U.S. core CPI below expectations (Updates prices, adds comments, details)

By Anirban Nag

LONDON, Oct (HKSE: 3366-OL.HK - news) 19 (Reuters) - The dollar index was subdued on Wednesday as Treasury yields ticked lower after U.S. consumer prices suggested underlying inflation was moderating, prompting investors to trim bets on an interest rate hike later this year.

The index was down 0.2 percent at 97.696, below Monday's seven-month high of 98.169. Against the yen, it was down 0.5 percent at 103.35 yen while the euro was slightly higher at $1.09965.

The dollar struggled to gain traction in the wake of U.S. inflation data on Wednesday. The core consumer price index (CPI), which strips out food and energy costs, gained 0.1 percent last month after climbing 0.3 percent in August. The year-on-year increase in the core CPI slowed to 2.2 percent following a 2.3 percent rise in August.

Fed fund futures imply around a 65 percent probability of the Federal Reserve raising interest rates by December, down from 70 percent before the CPI data.

"The U.S. data has not been great and U.S. rates have eased on the back of that. That has seen dollar/yen come under some pressure, but we expect some decent buying around the 103-103.50 yen level," said Yujiro Goto, currency strategist at Nomura.

The dollar also has to overcome uncertainty stemming from the Presidential election in November. A report from currency specialists HiFX said as investors grow wary before the election, they are more likely to withdraw their funds, putting downward pressure on the dollar.

EURO HIGHER BEFORE ECB

Nomura's Goto said there was a slight upside risk to the common currency before the European Central Bank's policy meeting on Thursday. The ECB is expected to keep its policy unchanged with any decisions on the future of its asset purchase scheme expected to be deferred until December.

But some traders expect ECB chief Mario Draghi to clarify his stance on recent talk that the ECB is considering tapering its asset purchases.

"We look for this week's ECB meeting to disappoint markets and fail to answer any questions about what's expected to happen to the asset purchase programme beyond March," said Jacqui Douglas, chief European macro strategist at TD Securities.

"The December meeting is where we expect the ECB to address the parameters of the programme, and introduce the intension to begin tapering after March 2017." (Additional reporting by Masayuki Kitano; Editing by Catherine Evans)