FOREX-Dollar weak as upbeat CPI data fails to impress

* Gasoline, rents boost U.S. consumer inflation

* Sterling surges after markets sniff BOE (Shenzhen: 000725.SZ - news) rate hike

* Swiss central bank ditches mantra on franc overvaluation

* Graphic: World FX rates in 2017 http://tmsnrt.rs/2egbfVh (Updates prices, market activity and comments to U.S. afternoon trading)

By Saqib Iqbal Ahmed

NEW YORK, Sept 14 (Reuters) - The dollar lost ground against a basket of major currencies on Thursday even though data that showed a faster-than-forecast increase in domestic consumer prices boosted generally depressed expectations for another U.S. rate hike later this year.

U.S. consumer prices accelerated in August amid a jump in the cost of gasoline and rental accommodation, signs of firming inflation that could allow further monetary policy tightening by the Federal Reserve.

The dollar index, which tracks the greenback against six major currencies, was down 0.42 percent at 92.136.

"The inflation number, while probably not high enough to set off any inflation alarm bells just yet, should still be sufficient keep alive hopes for a third rate hike in December by the Fed," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.

Interest rates futures implied traders saw an about 50 percent chance of a rate increase in December, up from 41 percent on Wednesday, based on data from CME Group (Kuala Lumpur: 7018.KL - news) 's FedWatch program.

The dollar briefly rose after the data but was quick to give up those gains.

"Ultimately inflation pressures are still somewhat subdued and markets continue to have a lot of doubt whether the Fed is going go again in December," said Sireen Harajli, FX strategist at Mizuho in New York.

Thursday's data was the last major reading on the economy going into next week’s Federal Open Market Committee meeting.

The dollar index had gained 0.69 percent on Wednesday, its biggest jump in nearly six weeks, and that helped explain the dollar's muted reaction to Thursday's data, Esiner said.

The dollar index is down about 10 percent for the year amid an increasingly uncertain outlook for U.S. monetary and fiscal policy.

"We think the trend continues to be more negative than positive for the dollar," Mizuho's Harajli said.

Meanwhile, Britain's pound topped $1.34 for the first time in a year after the Bank of England warned it might raise interest rates for the first time in a decade in the "coming months."

The Swiss franc was down against the euro after Switzerland's central bank softened its language on the currency's valuation, though it stood firm on its ultra-easy monetary policy stance.

(Reporting by Saqib Iqbal Ahmed; Editing by Nick Zieminski and Meredith Mazzilli)