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TOKYO (Reuters) – The dollar is gaining strength against its major peers on Tuesday, as the Fed's Chairman Jerome Powell's first congressional statement on the pace of U.S. interest rate rises.
Powell will testify on the economy and monetary policy before The US Senate Banking Committee at 1400 GMT on Tuesday, followed by a testimony at the same time on Wednesday to the House of Representatives Financial Services Committee.
"It seems that the markets are focusing on the US and China may affect the outlook for the Fed's tightening," said Masafumi Yamamoto, chief currency strategist at Mizuho Securities.
"Powell, who is Republican and close to the Trump administration, will not stress much about the negative side of the US-China trade war," said Yamamoto, who expects dollar-yen to consolidate to 115.
Powell is likely to reaffirm the Fed's gradual monetary tightening policy in his testimony, in the market's appetite for risk.
On Tuesday, the dollar traded at 94.51 .DXY against a basket of six major currencies, paring small gains during early morning trade.
The U.S. currency strengthened 0.1 percent against the yen to 112.4 yen JPY =, ticking up to a six-month high of 112.80 Yen reached on July 13. Japanese markets reopened after a holiday on Monday.
The dollar's gains have been bridged by the United States and China, the greenback's solid performance so far.
The International Monetary Fund had warned on Monday that escalating and sustained trade conflicts following U.S. tariff actions threatening to derail economic recovery and depressing medium-term growth prospects.
"Back in the 1980s or 1990s, when the US made the US dollar," said Osamu Takashima, head of G10 FX strategy , Japan at Citigroup Global Markets Japan.
"This time, the relationship between China and the US is probably more complicated," he said.
On Tuesday, the Australian dollar AUD = D4 traded nearly flat, edging 0.02 percent lower to $ 0.7419.
The New Zealand dollar NZD = D3 gained 0.8 percent to $ 0.6833, its highest level since hitting 0.6835 per US dollar on July 11.
The euro EUR = and British GBP pound = D3 were also barely changed against the greenback. The single currency added 0.01 percent to $ 1.17125, while the pound was up 0.04 percent at $ 1.3242.
"It seems like the dollar-yen is kind of immune to the Chinese risk at the moment," said Mizuho Securities' Yamamoto.
But "there is a risk that if the Shanghai Composite Index remains weak and the renminbi keeps depreciating, it will cap the Australian dollar's top side," he said.
Editing by Jacqueline Wong
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