* Dollar's advance stalls as U.S. yields reverse course and
* Euro steady after shaking off Italy PM's resignation
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
By Shinichi Saoshiro
TOKYO, Aug 21 (Reuters) - The dollar was on the defensive on
Wednesday, elbowed off a three-week peak by a reversal in U.S.
yields as they headed south again ahead of a meeting of central
bankers, at which the Federal Reserve is expected to give clues
on further rate cuts.
Central bankers will gather at Jackson Hole, Wyoming, on
Friday with markets focused on a scheduled speech by Fed Chair
Jerome Powell.
His comments will take centre stage especially after last
week's inversion of the U.S. yield curve -widely regarded as a
recession signal- boosted expectations for the Fed to lower
interest rates at its September policy meeting. Faced with
rising risks to the U.S. economy, the central bank in July cut
rates for the first time since the financial crisis.
The dollar index .DXY against a basket of six major
currencies was flat at 98.210 after shedding 0.2% overnight.
The index had climbed to 98.450 on Tuesday, its highest
since Aug. 1, as U.S. yields bounced back from multi-year lows
at the week's start on signs global policymakers were ready to
step up stimulus support to stave off a steep economic downturn.
U.S. yields, however, declined overnight on the prospect of
more easing by the Fed.
Takuya Kanda, general manager at Gaitame.Com Research
Institute, believes U.S. President Donald Trump's "strong desire
for deep rate cuts" may raise hopes among some traders of strong
easing signals at Jackson Hole. But he also warned that Powell
may opt to give little away in his speech as the Fed prepares
for the September policy review.
Investors will also be looking for clues on the Fed's plans
in minutes of its July policy meeting due later on Wednesday.
The dollar was little changed at 106.330 yen JPY= after
shedding 0.4% the previous day, while the euro was steady at
$1.1094 EUR= , having put on 0.2% overnight.
The single currency dipped briefly after Italy's Prime
Minister Giuseppe Conte announced his resignation on Tuesday.
"Conte's resignation won't have a strong impact on the euro
in the longer run as it is only a chapter in the ever-shifting
Italian politics," said Kanda at Gaitame.Com Research.
Sterling traded at $1.2162 GBP=D3 , holding a bulk of the
gains made on Tuesday when it advanced 0.4%.
The pound rose after German Chancellor Angela Merkel said
the European Union would think about practical solutions
regarding the post-Brexit Irish border. The Australian dollar AUD=D3 was largely flat at $0.6775
after edging up 0.2% on Tuesday.