* AUD hits new 3-year peak as commodity currencies soar
* Japan public holiday curbs volume in Asia; yen steady
* Powell testimony due at 1500 GMT
* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E
By Tom Westbrook
SINGAPORE, Feb 23 (Reuters) - The dollar nursed losses near
a six-week low on Tuesday and commodity-linked currencies
loitered around multi-year highs, as investors' focus shifted to
how U.S. Federal Reserve chief Jerome Powell might respond to
resurgent inflation expectations.
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.
However the gains have come with a worldwide rise in
inflation expectations and a big sell-off in longer-dated bonds.
Traders 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.
"I think he will talk up the downside," said Commonwealth
Bank of Australia currency analyst Joe Capurso in Sydney.
"If anything, I think he will give markets a bit of a cold
shower and say: 'Mr Market you're getting a bit ahead of
yourself. There are plenty of risks...and the U.S. economy is
long, long way from full employment.'"
Asia trade was dampened by a public holiday in Tokyo, but
renewed confidence that low U.S. interest rates will not rise
anytime soon could clear the way for further gains in
trade-exposed currencies at the dollar's expense.
Positioning data shows investors overwhelmingly betting that
a U.S. dollar that has been dropping since last March will keep
falling as the world recovers from the COVID-19 pandemic, even
if short holdings have been trimmed slightly in recent weeks.
0#NETUSDFX
"The broad dollar retains a heavy tone, expect the dollar
index to continue testing the 90.00 support," said OCBC Bank
strategist Terence Wu.
"Selling pressure remains strong for now. We turn slightly
more cautious, but if dollar-negative views are still to be
expressed, (we) prefer to do it through commodity currencies."
The U.S. dollar index =USD fell to 89.941 on Tuesday, its
lowest since mid-January. The Australian dollar AUD=D3 briefly
hit its highest since early 2018, buying $0.7934, while the kiwi
NZD=D3 held steady around $0.7320. The Canadian dollar
CAD=D3 held just below Monday's near three-year high.
The euro EUR=EBS made a small gain to $1.2167 and is
poised to re-test resistance around $1.2220.
Sterling GBP=D3 , which has rallied nearly 3% this year as
a speedy vaccine rollout has inspired confidence in the prospect
of a British economic rebound, held above $1.40 at $1.4072.
The Japanese yen JPY= , which has been the worst performing
major currency of 2021 because rising U.S. Treasury yields can
draw investment from Japan, steadied at 105.02 per dollar.
Elsewhere bitcoin dropped as far as 6%, but has found
support above $50,000 after a wild overnight ride where it
traded in a $10,000 range and dropped as low as $47,400.
Currency bid prices at 0419 GMT
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Previous Change
Session
Euro/Dollar EUR=EBS $1.2168 $1.2158 +0.08% +0.00% +1.2177 +1.2160
Dollar/Yen JPY=D3 105.0400 105.0700 -0.01% +0.00% +105.0650 +105.0550
Euro/Yen EURJPY= 127.82 127.72 +0.08% +0.00% +127.8200 +127.6700
Dollar/Swiss CHF=EBS 0.8957 0.8962 -0.04% +0.00% +0.8960 +0.8950
Sterling/Dollar GBP=D3 1.4073 1.4064 +0.06% +0.00% +1.4082 +1.4064
Dollar/Canadian CAD=D3 1.2594 1.2619 -0.17% +0.00% +1.2617 +1.2586
Aussie/Dollar AUD=D3 0.7915 0.7916 -0.01% +0.00% +0.7934 +0.7909
NZ NZD=D3 0.7318 0.7329 -0.12% +0.00% +0.7333 +0.7313
Dollar/Dollar
All spots FX=
Tokyo spots AFX=
Europe spots EFX=
Volatilities FXVOL=
Tokyo Forex market info from BOJ TKYFX
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World FX rates https://tmsnrt.rs/2RBWI5E
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