Higher US interest rates, or the expectations thereof, have tended to boost the value of the dollar to the detriment of emerging-market currencies in particular, which previously benefited from the era of ultralow interest rates in developed economies.
But "it is hard to predict the ultimate outcome of current discussions over trade policy", he said.
NZ Stats reported that the 1.5% rise in inflation was mainly attributable to higher prices for housing and household utilities, with gains of 0.9% and 3.1% in the quarter and in the year, respectively. "The dollar is really reacting to this "goldilocks" effect of the economy and a slowly rising interest rate environment".
Even before Powell's testimony, traders said the Sino-U.S. trade conflict was keeping a keeping a lid on equity prices and currencies in both countries.
The tech-heavy Nasdaq composite notched a record high on Tuesday before closing up 0.63 percent to 7,855.12 and outperforming other US indexes, which recorded slighter gains.
Copper on the London Metal Exchange was up 1.1 percent at $6,255 a tonne amid low stockpiles.
Powell will likely reiterate the Fed's plan for gradual monetary policy tightening as he takes his upbeat view of the USA economy to Capitol Hill later this session.
Powell faced a number of questions for a second day from lawmakers about the threat that a trade war poses for the USA and global economies.
Benchmark U.S. 10-year notes last fell 2/32 in price to yield 2.8637 percent, from 2.856 percent late on Monday.
Powell did not address his individual views on the appropriate pace of tightening or whether he thinks, as some of his colleagues have argued, that the Fed should pause its rate hike cycle sometime next year if inflation remains under control.
U.S. Federal Reserve Chairman Jerome Powell said on Tuesday that for now, the best way forward for the central bank is to keep gradually raising the federal funds rate. RBC is forecasting a year-end euro/dollar of $1.12.
The dollar pared the previous day's losses and gained 0.1 percent to 112.39 yen, crawling back towards a six-month peak of 112.80 touched last week.
U.S. President Donald Trump's top economic advisor, Larry Kudlow, also said on Wednesday that he believed Chinese President Xi Jinping has blocked progress on a deal to end duelling U.S. and Chinese tariffs.
With no local data today, investors will watch for Australian employment which may show a softer labour market across the Tasman. Ongoing political turmoil related to Britain's plans to leave the European Union has also served as a lingering drag on the pound.
Brent crude hit another three-month low Tuesday, at US$71.35 per barrel, before recovering.