Dollar tiptoes toward inflation, Powell testimony

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By Tom Westbrook

SINGAPORE (Reuters) – Currency markets were on edge and the dollar a few ticks lower on Tuesday, ahead of U.S. inflation data which traders think could offer clues about the timing of tapering and rate hikes.

The possibility of hikes – brought to the fore by a surprise shift in tone last month from the Federal Reserve – has boosted the dollar in recent weeks as investors have re-assessed their assumption of prolonged low U.S. rates.

Against the euro the greenback inched a fraction lower during the Asia session to $1.1868, though that still has the dollar up about 2.2% on the common currency in a month.

Aside from looming U.S. inflation data, further moves in the euro were kept in check by comments on Monday from European Central Bank President Christine Lagarde, who flagged a dovish change in forward guidance.

Economists polled by Reuters expect the U.S. consumer price index to have risen 0.5% from May and 4.9% from a year earlier. Dealers…

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