FOREX-Dollar nudged off 3-week high, U.S. yields capped before Jackson Hole

* Dollar's advance stalls as U.S. yields reverse course and
fall
* Euro steady after shaking off Italy PM's resignation
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

(Adds details and quotes, updates prices)
By Shinichi Saoshiro
TOKYO, Aug 21 (Reuters) - The dollar was under pressure on
Wednesday, elbowed off a three-week peak after a bounce in U.S.
yields stalled ahead of a global central bankers meeting, at
which the Federal Reserve is expected to give clues on further
rate cuts.
Officials from major central banks will gather at Jackson
Hole, Wyoming, on Friday with markets focused on a scheduled
speech by Fed Chair Jerome Powell.
His comments are of particular interest after last week's
inversion of the U.S. yield curve - widely regarded as a
recession signal - boosted expectations the Fed would lower
interest rates at its September policy meeting. Faced with
rising risks to the U.S. economy, the central bank in July cut
rates for the first time since the financial crisis.
The dollar index .DXY against a basket of six major
currencies was nearly flat at 98.232 after shedding 0.2%
overnight.
The index had climbed to 98.450 on Tuesday, its highest
since Aug. 1, as U.S. yields bounced from multi-year lows at the
week's start on signs global policymakers were ready to step up
stimulus support to stave off a steep economic downturn.
U.S. yields, however, declined overnight on the prospect of
more easing by the Fed.
Takuya Kanda, general manager at Gaitame.Com Research
Institute, believes U.S. President Donald Trump's "strong desire
for deep rate cuts" may raise hopes among some traders of strong
easing signals at Jackson Hole. But he also warned that Powell
may opt to give little away in his speech as the Fed prepares
for the September policy review.
Investors will also be looking for clues on the Fed's plans
in minutes of its July policy meeting due later on Wednesday.
The dollar bounced 0.2% to 106.460 yen JPY= reversing a
part of the previous day's losses, while the euro was steady at
$1.1094 EUR= , having put on 0.2% overnight.
The single currency dipped briefly after Italy's Prime
Minister Giuseppe Conte announced his resignation on Tuesday.
"Conte's resignation won't have a strong impact on the euro
in the longer run as it is only a chapter in the ever-shifting
Italian politics," said Kanda at Gaitame.Com Research.
In addition to the Fed, the euro also has to contend with
the possibility of the European Central Bank easing policy in
September.
The Bundesbank said on Monday that the German economy may
have continued to shrink over the summer as industrial
production declined. That would mean the euro zone's biggest
economy is now in recession following the second quarter's
decline reported last week. Recession is commonly defined as two
consecutive quarters of negative growth. "Germany in recession would generate a strong buzz, and
there is no doubt that economic conditions in the zone would
force the ECB to take its next policy steps," said Daisuke
Karakama, chief market economist at Mizuho Bank.
Sterling traded at $1.2156 GBP=D3 , holding a bulk of the
gains made on Tuesday when it advanced 0.4%.
The pound rose after German Chancellor Angela Merkel said
the European Union would think about practical solutions
regarding the post-Brexit Irish border. The Australian dollar AUD=D3 was largely flat at $0.6779
after edging up 0.2% on Tuesday.