- Dollar drifts higher
- Traders await UK CPI and Powell testimony
SINGAPORE, June 21 (Reuters) - The dollar was firmer on Wednesday leading in to Federal Reserve Chair Jerome Powell's appearance at Congress where he is expected to strike a hawkish tone, while sterling lingered below recent peaks ahead of key inflation data.
British inflation data is due at 0600 GMT, Bank of Japan Governor Kazuo Ueda is due to speak at 0630 GMT and Powell is due to begin his testimony before Congress at 1400 GMT.
Sterling fell overnight but recovered about half its losses to trade steady at $1.2763 through the Asia session, not far below last week's 14-month high of $1.2849.
Economists expect inflation to show signs of easing and the data is likely to be decisive for the Bank of England. It meets on Thursday with markets currently pricing about a 75% chance of a 25 basis point hike and a 25% chance of a 50 basis point hike.
"Sterling may halt the current reversal (if) expectations are reshaped, with the pair potentially jumping back above $1.28 and re-testing last week's resistance at $1.2847," said Daniela Hathorn, analyst at Capital.com.
The euro was held to $1.0914 in Asia trade, while the yen slipped slightly to 141.80 per dollar as Bank of Japan minutes and officials stuck to a dovish stance and as traders turned their focus to the Fed.
"Despite having paused last week, the Fed officials ... still surprisingly aggressively forecasted another 50 basis points in hikes by end 2023," said currency analysts at Maybank.
"It is crucial to see whether (Powell) would more strongly drive home the point that the Fed is serious about another 50 bps of hikes or give the impression that they are 'data dependent'," they said. "The former may do more to give additional support to send the dollar index and yields higher."
Elsewhere there was little appetite for a bounce from either the yuan or the Australian dollar, which have been battered by China's stalled economic recovery and lack of major stimulus.
China set its yuan midpoint weaker than expected on Wednesday and the currency slid to a new seven-month trough of 7.1987 in onshore trade, while the offshore yuan weakened past 7.2 to the dollar.
The Aussie had taken a further beating thanks to Tuesday's less-hawkish-than-expected central bank minutes following this month's rate hike. It fell 0.9% overnight and last bought $0.6786.
"The path of least resistance is further declines," said Commonwealth Bank of Australia strategist Joe Capurso.
"The Aussie could dip below 0.6700 this week, particularly if Powell is hawkish," he said. Powell is due to begin his testimony at 1400 GMT.
The New Zealand dollar was dragged lower in sympathy, breaking below its 50-day moving average before steadying just above its 200-day moving average at $0.6178.
The U.S. dollar index was marginally firmer at 102.60. Bitcoin extended overnight gains to breach$29,000 for the first time since late May, helped by the launch of a new crypto exchange backed by Fidelity, Citadel Securities and Charles Schwab.
Reporting by Tom Westbrook; Editing by Sam Holmes
Source: Reuters