TOKYO: The dollar hovered near a three-week high versus major peers on Tuesday as traders awaited the release of U.S. inflation data later in the day that could provide clues on the path for monetary policy.
The U.S. currency was also buoyed by elevated Treasury yields, with investors weighing a potential exit of Jerome Powell from the Federal Reserve as President Donald Trump continued his criticism of the central bank chairman.
Currencies showed little reaction to data showing China’s economy grew 5.2% last quarter, slightly topping analysts’ forecasts.
Bitcoin drifted further from Monday’s all-time peak of $123,153.22 following a seven-day, 14% surge as investors bet on long-sought legislative policy wins for the cryptocurrency industry this week. It was changed hands at around $118,215 as of 0240 GMT.
The dollar was little changed at 147.68 yen, after earlier rising to the highest since June 23 at 147.89 yen.
The dollar index, which tracks the currency against the yen and five other major rivals, stood at 98.050, not far below the overnight peak of 98.136, the highest since June 25.
The euro edged up slightly to $1.1671 after slipping to $1.1650 on Monday for the first time since June 25.
Fed Chair Powell has said he expects inflation to increase this summer as a result of tariffs, which is seen keeping the U.S. central bank on hold until later in the year.
Economists polled by Reuters expect headline inflation to increase to 2.7% on an annual basis, up from 2.4% the prior month. Core inflation is expected to rise to 3.0%, from 2.8%.
“Should inflation fail to materialise or remain steady, questions may arise regarding the Fed’s recent decision not to cut rates, potentially intensifying calls for monetary easing,” James Kniveton, senior corporate FX dealer at Convera, wrote in a client note.
“Calls from the White House for leadership changes at the Fed may increase.”
Trump on Monday renewed his attacks on Powell, saying interest rates should be at 1% or lower, rather than the 4.25% to 4.50% range the Fed has kept the key rate at so far this year.
Fed funds futures traders have been pricing in 50 basis points of interest rate cuts by year-end, with the first reduction expected in September.
“If Powell leaves, we expect the (U.S. Treasury yield) curve to steepen sharply, with the short-end factoring in front-loaded rates cuts,” DBS analysts wrote in a note.
“Meanwhile, the loss of confidence in price stability should translate into sharply higher 10-year and 30-year yields.”
China’s economic growth topped market forecasts in the second quarter - even as it slowed slightly from the prior three months - in a sign of resilience against U.S. tariffs.
At the same time, analysts warned of underlying weakness and rising risks that will ramp up pressure on Beijing to roll out more stimulus.
The Chinese yuan was flat at 7.1728 per dollar.
The Aussie was steady at $0.6546.
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