Dollar gains on growth fears ahead of Fed chair's remarks

The safe haven dollar gained ground on most peers on Wednesday as investors turned nervous again about global growth prospects, while the yen hit a fresh 24-year low as elevated bond yields in the US and Europe contrasted with low Japanese interest rates.

The euro fell 0.3 per cent to $1.0493, and sterling was down 0.4 per cent at $1.2228 ahead of British consumer price data, as investors turned to the dollar as part of a move away from riskier assets which also saw a stock market rally fizzle out.

An elevated CPI figure would add further pressure on the Bank of England to keep raising rates, as Britain, like most developed economies, grapples with sky high inflation.

Wednesday's other main event is the start of US Federal Reserve Chair Jerome Powell's two-day testimony to Congress, with investors looking for further clues about whether another 75 basis point rate hike is on the cards at the Fed's July meeting.

The dollar index was 0.3 per cent higher at 104.7.

The yen was last drifting at 136.1 per dollar, firmer on the day, having hit 136.71 in early trade, its lowest since October 1998.

Analysts see no immediate end to a sell-off that has seen the yen weaken 18 per cent so far this year from 115.08 at the end of 2021.

The currency has been weakening as higher energy prices put pressure on Japan's current account and because of the ever widening gap between yields on Japanese government bonds and US Treasuries.

The Bank of Japan last week maintained ultra-low interest rates and vowed to defend its policy of yield curve control (YCC), which effectively caps the yield on the 10-year Japanese government bond at 0.25 per cent.

"Dollar/yen is continuing to trade on the Treasury yields, which have been stable but with the 10-year staying above the 3.20 per cent level while the Bank of Japan has done a lot to defend YCC," said Redmond Wong, market strategist at Saxo Markets Hong Kong.

Some investors had bet the BOJ would tweak that policy, which is causing ructions in Japan's bond market, a move that would typically cause the yen to strengthen and Japanese government bond yields to rise.

Wong said because the BOJ had not changed its policy at last week's meeting, these positions were now being unwound or reversed with some betting the yen would continue to weaken.

The Australian dollar fell 0.7 per cent to $0.6919, as low commodity prices, such as iron ore, continued to weigh, also losing ground amid the risk off mood.

Bitcoin was at $20,600, struggling to break away from the symbolic $20,000 level in either direction, following recent declines.