By Rae Wee

SINGAPORE (Reuters) - The dollar sank to a two-month low against its major peers on Wednesday in the lead-up to a key U.S. inflation reading, while sterling scaled a 15-month top on expectations the Bank of England (BoE) has further to go in raising rates.

U.S. inflation data is due later on Wednesday, with expectations core consumer prices rose 5% on an annual basis in June. The figures should also provide further clarity on the Federal Reserve's progress in its fight against inflation.

Ahead of the release, the U.S. dollar fell to a two-month low of 101.45 against a basket of currencies, extending its losses from the start of the week after Fed officials said the central bank was nearing the end of its current monetary policy tightening cycle.

The euro rose 0.07% to $1.1018, flirting near Tuesday's two-month high of $1.1027.

"We're already seeing markets move in anticipation of a softer U.S. inflation report," said Matt Simpson, senior market analyst at City Index. "That runs the risk of a 'buy the rumour, sell the fact' reaction if the figures come in around expectations."

Elsewhere, sterling peaked at a 15-month high of $1.2940 in early Asia trade, bolstered by bets the BoE will have to tighten monetary policy further to tame British inflation that is running at the highest rate of any major economy.

Data out on Tuesday showed that a key measure of British wages rose at the joint fastest pace on record as basic earnings in the three months to May surged 7.3%, higher than expectations of a 7.1% rise.

"The (BoE) will have their heads in their hands following the latest employment and wages figures, as it likely forces them to hike by another 50 basis points (bps) at their next meeting and have a terminal rate above 6%," Simpson said.

Current market pricing indicates roughly another 140 bps of rate hikes from the BoE.

The Japanese yen strengthened past the 140 per dollar level on Wednesday to peak at a one-month high of 139.54 per dollar, drawing some support from expectations that the Bank of Japan (BOJ) could tweak its controversial yield curve control (YCC) policy at its upcoming meeting this month.

"Although steady policy appears to be the most likely outcome for the July policy meeting, it is widely expected to bring upgraded inflation forecasts and the market will continue to hope that the BOJ may offer some signal as to when YCC could be adjusted," said Jane Foley, head of FX strategy at Rabobank.

"Speculation of a possible tweak could allow the (yen) some support ahead of the BOJ meeting this month."

In other currencies, the New Zealand dollar rose 0.34% to $0.6219 ahead of a monetary policy decision from the Reserve Bank of New Zealand (RBNZ) later on Wednesday, though expectations are for the central bank to keep rates on hold.

"While we continue to see the balance of risks tilted toward the RBNZ eventually having to do more, that's not expected to happen today," said Susan Kilsby, an agricultural economist at ANZ.

The Aussie gained 0.39% to $0.6713.