Dollar holds near two-decade high before U.S. inflation data

U.S. hundred dollar notes are seen in this picture illustration taken in Seoul February 7, 2011. REUTERS/Lee Jae-Won

TOKYO, May 11 (Reuters) – The dollar hovered near a two-decade high against major peers on Wednesday, ahead of a key reading on inflation that should provide clues on how aggressive the Federal Reserve will be in tightening monetary policy.

The dollar index , which measures the currency versus six rivals, slipped slightly to 103.81, but still not far from the high of 104.49 reached at the start of the week for the first time since December 2002.

The euro rose a touch to $1.05405, but has mostly traded sideways since plumbing a more than five-year low at $1.04695 at the end of last month.

The yen continued to get some respite from a pause in the recent relentless rise in benchmark U.S. Treasury yields ,…