Investing.com - The dollar extended early losses against the yen on Wednesday, falling to the day’s lows as mixed U.S. inflation data and mounting tensions over Syria weighed.

USD/JPY was down 0.35% to 106.82 by 09:12 AM ET (13:12 GMT), the lowest levels of the day. The safe haven yen is often sought out by investors in time of market turmoil and political tensions.

The U.S. consumer price index fell 0.1% in March the Labor Department reported Wednesday, in what was the first and biggest drop in ten months.

However annual inflation rose by 2.4% while underlying inflation rose 2.1% year-on-year.

The report did little to alter the outlook for monetary policy. The Federal Reserve raised interest rates for the first time this year last month and stuck to its projections for three rate hikes this year.

Investors were looking ahead to the minutes of the Fed’s March meeting later in the day for any fresh indications on the pace of monetary tightening.

Market sentiment had been hit earlier after U.S. president Donald Trump warned Russia in a tweet to "get ready” for imminent military action in Syria in response to an alleged chemical attack over the weekend.

Investors fear that the conflict in Syria could escalate, amid rising tensions between the U.S. and Russia.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.11% at two week lows of 89.23.

The euro pared back gains against the dollar, with EUR/USD last at 1.2375 after rising as high as 1.2396 earlier.

The single currency remained supported after European Central Bank policymaker Ewald Nowotny said Tuesday that it was time to “normalize” its monetary policy.

Sterling also pared back early gains against the dollar, with GBP/USD last at 1.4180.

The pound came under pressure earlier after data showing an unexpected fall in UK manufacturing output in February.

The report will be scrutinized by the Bank of England, which has been widely expected to raise interest rates next month.