By Shinichi Saoshiro
TOKYO (Reuters) - The dollar wallowed against the yen and other major currencies on Wednesday after the sudden dismissal of U.S. Secretary of State Rex Tillerson killed off an earlier bounce in the currency.
U.S. President Donald Trump fired Tillerson on Tuesday after a series of public rifts over policy on North Korea, Russia and Iran, replacing his chief diplomat with loyalist CIA Director Mike Pompeo.
It was deja vu for the currency market and the dollar, which had declined a week ago when the exit of White House economic advisor Gary Cohn undermined investor sentiment towards the greenback.
The dollar was down 0.1 percent at 106.490 yen , having slipped overnight from a two-week high of 107.300 reached after wariness over a political scandal in Japan waned slightly.
The greenback also lost a bit of traction after the February U.S. inflation data released on Tuesday was in line with expectations, suggesting the Federal Reserve remained on track to raise interest rates at a gradual pace.
Masafumi Yamamoto, chief forex strategist at Mizuho Securities in Tokyo, said comings and goings in the White House were becoming something of an everyday occurrence and that dollar's reaction was likely to become more limited each time.
"For the dollar to rise above 107 yen again, it may need a clarification of the ongoing political scandal in Japan in addition to a hint by the Fed at this month's meeting that it might accelerate the pace of rate hikes," Yamamoto said.
The yen had risen against the dollar at the start of the week as a political scandal engulfed Japanese Prime Minister Shinzo Abe and his close ally, Finance Minister Taro Aso.
The Japanese currency advanced as the cronyism scandal raised doubts about Abe's ability to continue pursuing his economic policies, dubbed "Abenomics," which included aggressive monetary easing.
The Fed holds a two-day policy meeting starting on March 20 and the central bank is widely expected to raise interest rates for the first time this year.
The dollar index against a basket of six major currencies was little changed at 89.711 <.DXY> after it tracked a decline in U.S. yields and shed 0.25 percent on Tuesday.
The euro was steady at $1.2394 after rising 0.45 percent overnight.
The pound was up 0.1 percent at $1.3982 and in close reach of a two-week peak of $1.3994 scaled on Tuesday on the back of the dollar's broad decline.
The Australian dollar was steady at $0.7860 after bouncing to a two-week high of $0.7898 the previous day on robust business indicators.
(Reporting by Shinichi Saoshiro; Editing by Sam Holmes)