* Dollar dips after Powell, roughly flat on the day
* Sterling hits fresh three-year high
* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E
NEW YORK, Feb 23 (Reuters) - The dollar reversed earlier
gains on Tuesday morning after a dovish speech from U.S.
Federal Reserve chief Jerome Powell failed to quell inflation
fears, 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 raised concerns about a
possible spike in inflation. The recent rise in inflation
expectations as investors bet on a post-pandemic economic
recovery and the so-called "reflation" trade has hurt the dollar
Powell's speech on Tuesday did little to allay inflation
fears. In remarks prepared for delivery to a Senate Banking
Committee, Powell said, "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," the
hurdle the Fed has set for discussing when it might be
appropriate to pare back support.
"The new fear of inflation - he did try to cap down the
worry a little bit," said John Doyle, vice president of dealing
and trading at Tempus Inc.
But, he added, "I think is going to continue that
line about holding rates low for a long time. I think he's going
to try to continue to be that reassuring voice for markets.
Which is why we've seen a little bit of recovery in risk as he
started to speak and the dollar dip."
The dollar index was last at 90.115, 0.08% higher on
the day, but off session highs after the post-Powell dip.
Sterling hit a new nearly three-year high of $1.412
, 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 months.
Prime Minister Boris Johnson on Monday laid out a
step-by-step plan for ending the current British lockdown.
"The pound made the most noise on a quiet night," said
Doyle. In addition to the plans to end lockdowns, sterling has
benefited in recent months from relief over Brexit and
better-than-expected economic data, which diminished the chances
the Bank of England would push interest rates below zero.
Elsewhere, the euro strengthened 0.07% to $1.216
and the Japanese yen, the worst performing major currency
of 2021, remained down on the day despite the weakening in the
dollar. The dollar was last up 0.02% at 105.09 yen.
(Reporting by Kate Duguid in New York and Tommy Wilkes in
London; Editing by Steve Orlofsky)