FOREX-Dollar stabilizes after Powell, pound hits three-year high


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    * Dollar dips after Powell, roughly flat on the day
    * Sterling hits fresh three-year high
    * Graphic: World FX rates

 (New throughout)
    By Kate Duguid
    NEW YORK, Feb 23 (Reuters) - The dollar was modestly higher
on Tuesday afternoon after U.S. Federal Reserve chair Jerome
Powell pushed back on suggestions that loose monetary policy
risked unleashing inflation, while the British pound rose to
fresh three-year highs. 
    The growing likelihood that Congress will pass President Joe
Biden's $1.9 trillion stimulus plan has stoked fears about a
possible spike in inflation. As those expectations have risen,
so has the popularity of the so-called reflation trade, which
this month has pulled the dollar lower. 
    But in testimony before the U.S. Senate Banking Committee,
Powell said the central bank would keep its policies in place as
it focused attention on getting Americans back to work.*:nL1N2KT11N
    "The economy is a long way from our employment and inflation
goals, and it is likely to take some time for substantial
further progress to be achieved," said Powell. 
    Powell in 2020 said the central bank would be willing to
allow inflation to run higher than its target rate for periods
of time in order to average 2%. 
    While Powell did not allay the inflation fears, the central
bank's overall support for the economy may have kept the dollar
afloat on Tuesday. 
    "For the dollar, the jury remains out with regards to which
direction the next major move will be, though for now, inflation
concerns may be offset by hopes for a quicker U.S. economic
recovery, as vaccine distribution is expected to ramp up in the
coming weeks," said Ronald Simpson, managing director, global
currency analysis for Action Economics. 
    The dollar index was last at 90.141  =USD , 0.11% higher on
the day but off session highs after the post-Powell dip.
    Sterling hit a nearly three-year high of $1.411  GBP=D3  on
Tuesday morning, last up 0.33% 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
    Prime Minister Boris Johnson on Monday laid out a
step-by-step plan for ending the current British lockdown.*:nL8N2KS593
    Sterling has also benefited in recent months from relief
over Brexit and better-than-expected economic data, the latter
of which has diminished the chances the Bank of England would
push interest rates below zero, said John Doyle, vice president
of dealing and trading at Tempus Inc.  
    Elsewhere, the euro weakened 0.07% to $1.215  EUR=EBS  and
the Japanese yen  JPY= , the worst performing major currency of
2021, was down 0.20% on the day to 105.27 yen per dollar.   

World FX rates
U.S. dollar index
 (Reporting by Kate Duguid in New York and Tommy Wilkes in
London; Editing by Steve Orlofsky and Sonya Hepinstall)
 ((; +646-223-6118; Reuters

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