* Dollar briefly hits lowest since Jan. 13
* Aussie, Kiwi hold near multi-year highs
* Bitcoin takes another dive after record price
* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E
(Adds chart, new quote, latest prices)
By Tommy Wilkes
LONDON, Feb 23 (Reuters) - The dollar rebounded off six-week
lows on Tuesday as investors' focus shifted to how U.S. Federal
Reserve chief Jerome Powell might respond to resurgent inflation
expectations, while commodity-linked currencies hovered near
multi-year highs.
The recent rise in inflation expectations as investors bet
on a post-pandemic economic recovery and the so-called
"reflation" trade has lifted U.S. government bond yields. That
had fed through to a higher dollar until earlier this month when
the greenback resumed its decline.
Analysts expect Powell, who testifies before Congress at
1500 GMT, to provide some reassurance that the Fed will tolerate
higher inflation without rushing to raise rates. That might calm
bond markets and eventually weigh on the dollar, they said.
"Mr. Powell will very likely reiterate that the Fed is a
long way from meeting its goals and that it will likely take
some time before "sufficient progress" has been made to taper
its bond purchase program," UniCredit analysts said.
The dollar index was last at 90.143 =USD , up 0.1% on the
day, having earlier fallen to 89.941, its weakest since Jan. 13.
Positioning data shows investors overwhelmingly betting that
a U.S. dollar, which has been dropping since last March, will
keep falling as the world recovers from the COVID-19 pandemic.
0#NETUSDFX
"Only when the spike in U.S. yields becomes more disorderly
and spills forcefully into risk assets, would U.S. dollar
experience an across-the-board strength," said ING analysts in a
research note.
The euro weakened 0.1% to $1.2151 EUR=EBS . Euro zone
government bond yields have also been rising but the rally took
a brief pause after European Central Bank President Christine
Lagarde said on Monday the bank was "closely monitoring" rising
borrowing costs.
Commodity-linked currencies have been among the best
performers in 2021. Surging prices for materials from oil and
copper to lumber and milk powder have pushed currencies such as
the Canadian, Australian and New Zealand dollars to their
highest in roughly three years.
On Tuesday, the Aussie traded down 0.2% at $0.7903 AUD=D3
having earlier hit a high of $0.7934. The New Zealand dollar was
down marginally NZD=D3 while the Canadian dollar was just
below its Monday high CAD=D3 .
Sterling hit a new nearly three-year high of $1.4098
GBP=D3 , up 0.3% on the day, as investors stuck with their bets
that a rapid rollout of the COVID-19 vaccine would allow the
British economy to reopen over the next few months.
Prime Minister Boris Johnson laid out his step-by-step plan
for ending the current British lockdown on Monday.
Bitcoin, the world's biggest cryptocurrency, fell sharply
below $45,000 and was last down 15% at $45,953, extending its
drop from a record set on Sunday of $58,354 as investors grow
nervous about sky-high valuations. The Japanese yen JPY= , the worst performing major currency
of 2021 because rising U.S. Treasury yields can lure investment
from Japan, fell again. The dollar was last up 0.2% at 105.26
yen per dollar.
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World FX rates https://tmsnrt.rs/2RBWI5E
U.S. dollar index https://tmsnrt.rs/3pPOsiK
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