• Traders watch U.S. inflation data for signs of tariff
impact
• Fed has said CPI may rise in U.S. summer as it held off
cutting
rates
• Aussie dollar, yuan shrug off resilient Chinese GDP
figures
(Updates prices ahead of European markets open)
By Kevin Buckland
TOKYO, July 15 (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.
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 changing hands at around $117,550 as
of 0520 GMT.
The dollar was little changed at 147.62 yen , after
earlier rising to the highest since June 23 at 147.89 yen.
The dollar index , which tracks the currency against
the yen, euro and four other major rivals, eased slightly to
98.003, not far below the overnight peak of 98.136, the highest
since June 25.
The euro edged up to $1.1681, after dipping 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 about 50
basis points of interest rate cuts by year-end, with the first
quarter-point reduction seen as likely 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 later in the year that will ramp up pressure on
Beijing to roll out more stimulus.
The Chinese yuan weakened slightly to 7.1766 per
dollar in offshore trading.
The Aussie was steady at $0.6548.
(Reporting by Kevin Buckland; Editing by Sonali Paul and
Lincoln Feast.)
