(Recasts, adds fresh quotes)
* Yellen speech awaited, ADP payrolls data looms
* Investors wary of verbal intervention from Draghi
* Sterling near six-year highs on upbeat data
By Anirban Nag
LONDON, July 2 (Reuters) - The dollar hovered just above a two-month low against a basket of currencies on Wednesday, with the focus on Federal Reserve Chair Janet Yellen’s speech later in the day and a private sector survey of the U.S. labour market.
The euro lost some steam on concerns about verbal intervention from policymakers about a strengthening currency.
Sterling held strong near six-year highs against the dollar on more evidence of an upswing in the housing market which added to expectations that the Bank of England will tighten policy before the end of the year.
The dollar index was steady at 79.847, not far from a low of 79.740 struck on Tuesday. The dollar eased slightly against the yen, trading at 101.46 yen, and not far from a six-week low of 101.235 yen struck on Monday.
Investors will eye the ADP private sector survey due at 1215 GMT along with Yellen’s speech at 1500 GMT. Her recent dovish bias, especially after the latest Federal Reserve meeting, has been one of the main factors that have led investors to cut favourable positions in the dollar.
“At the time Yellen seemed determined to give as little support as possible to rate hike speculation,” said Esther Reichelt, currency strategist at Commerzbank.
“This is unlikely to be any different today. But the market is waiting for Fed signals and therefore already small hints can be sufficient to affect the dollar.”
The dollar’s recent drop has helped the euro recover all of the ground lost since the European Central Bank announced a new round of monetary easing a month ago. The bank has its next policy meeting on Thursday.
The euro was steady at $1.36715, having hit a six-week high of $1.3701 on Tuesday. The euro has gained more than 1 percent in two short weeks, a move that is likely to frustrate the ECB. President Mario Draghi recently warned that a strengthening currency in a low inflation environment was cause for serious concern.
“A non-event ECB may help the euro squeeze higher, at least initially. We would sell into any bounce, however, as the euro short-term rates converge to zero and given that the Fed/ECB balance sheet ratio may be close to topping out,” said Valentin Marinov, currency strategist at Citi.
“Verbal intervention by Draghi or indications of unsterilized asset purchases as soon as the fourth-quarter could send the euro lower against risk-correlated currencies and the pound.”
Sterling held firm near six-year highs following a survey which showed British house prices rose at their fastest annual pace in more than nine years last month.
Investors pushed sterling to fresh six-year highs after a survey on Tuesday, which showed British manufacturing growing at its fastest in seven month, added to the case for a rise in interest rates this year, well ahead of the United States.
The pound, which scurried to $1.7167 on Tuesday, its highest since October 2008, traded firm at $1.7150. A return to $1.7322 will mark its 50 percent retracement of the late-2007 to early-2009 tumble from $2.1162 to $1.3500.
Sterling also held near a 1-1/2-year high against the euro, which changed hands at 79.705 pence per euro, near the low of 79.59 set last month. (Editing by Foo Yun Chee)