The dollar dipped against the euro and the yen on Wednesday before the United States and China were due to sign a deal to de-escalate their trade war.

US President Donald Trump and Chinese Vice Premier Liu He will sign an initial trade deal that aims to vastly increase Chinese purchases of US manufactured products, agricultural goods, energy and services.

However, the United States will maintain tariffs on Chinese goods until the completion of a second phase of a trade agreement, US Treasury Secretary Steven Mnuchin said on Tuesday.

"In terms of the market impact I think its largely priced in_markets are starting to look at what stage two would look like," said Vassili Serebriakov, an fx strategist at UBS in New York.

The euro gained 0.26% against the greenback to $1.1156. The dollar dropped 0.14% against the yen to 109.82, after the Japanese currency on Tuesday hit its weakest level since May at 110.20.

Sterling was little changed, retracing losses after weakening when data showed UK inflation rose at its slowest in three years, feeding expectations the Bank of England would cut rates in January.

The Swiss franc gained to its strongest against the dollar in over a year, and its highest against the euro in almost three years, after the United States on Monday added Switzerland to its watchlist of currency manipulators.