By Kevin Buckland
TOKYO (Reuters) -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.
The Aussie dollar dipped from last week’s eight-month peak ahead of a report on gross domestic product in China, Australia’s top trading partner.
Bitcoin changed hands at $120,067, after pushing to an all-time high $123,153.22 on Monday as investors bet on long-sought legislative policy wins for the cryptocurrency industry this week.
The dollar was little changed at 147.75 yen early in Asia’s day, trading just below Monday’s high since June 23 at 147.78.
The dollar index, which tracks the currency against the yen and five other major rivals, stood at 98.104, just below the overnight peak of 98.136, the highest since June 25.
The euro was steady at $1.1662 after slipping to $1.1650 on Monday for the first time since June 25.
Fed Chair Jerome Powell has said that 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.
Meanwhile, China’s economy is likely to have cooled in the second quarter after a solid start to the year, as trade tensions and a prolonged property downturn drag on demand, raising pressure on policymakers to roll out additional stimulus to underpin growth.
Data due on Tuesday is expected to show GDP grew 5.1% year-on-year in April–June, slowing from 5.4% in the first quarter, according to a Reuters poll.
“Should the data disappoint, and China’s economic situation continue to underwhelm expectations, this could maintain downward pressure on the Australian dollar,” said Kniveton.
The Aussie edged down slightly to $0.6542.
(Reporting by Kevin Buckland; Editing by Sonali Paul)
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