The Australian dollar held above $0.8700 for the second consecutive day on Wednesday, as investors awaited testimony from the Federal Reserve chief for any clues on the outlook on rates in the world's biggest economy. The Aussie remained near Monday's 18-year peak of $0.8761, as investors still bet on high-yielding currencies.
That demand helped pushed the Aussie to a fresh 16-year high versus the low-yielding yen in offshore trade, touching 106.86 yen. The frail US dollar got some support in offshore trade on slightly higher than expected core US producer prices data, which strip out food and energy prices. That reduced the chances the Fed might cut its 5.25 percent interest rate this year.
With rate differentials in the spotlight, sterling extended gains to a 26-year high of $2.0478 on Wednesday, after Britain's higher-than-expected core consumer inflation data for June on Tuesday fuelled speculation rates there will rise to 6 percent.