Dollar wallows near 3-1/2-year low as Fed easing, Trump bill in focus
The greenback was pinned near its weakest since September 2021 on the euro, and was close to its lowest since January 2015 versus the Swiss franc.
Powell reiterated on Tuesday at the European Central Bank's annual conference in Sintra, Portugal, that the Fed is taking a patient approach to further interest rate cuts. But he did not rule out a reduction at this month's meeting, saying everything depends on incoming data.
That raises the stakes for the monthly non-farm payrolls report on Thursday. Indications of labour market resilience in the U.S. JOLTS figures overnight saw the dollar rise off Tuesday's lows.
The dollar index, which measures the currency against six major counterparts, edged up slightly to 96.744, but did not stray far from the overnight low of 96.373.
Markets are also keeping a close watch on Trump's massive tax-and-spending bill, which could add $3.3 trillion to the national debt. The bill, which was passed by the U.S. Senate, will return to the House for final approval.
"The confirmation that this is an increase in issuance, an increase in government spending well beyond its means, is not necessarily good news for the Treasury market, and it's arguably one of the reasons the dollar's going down," said Rodrigo Catril, a strategist at National Australia Bank.
Also weighing on the U.S. currency has been Trump's continued attacks on Powell, putting Fed independence in the spotlight.
On Monday, the president sent the Fed Chair a list of global central bank key rates adorned with handwritten commentary, saying the U.S. rate should be between Japan's 0.5 per cent and Denmark's 1.75 per cent, and telling him he was "as usual, 'too late.'"
The greenback held steady at 0.7917 Swiss franc, after dipping as low as 0.7873 franc in the previous session.
The euro weakened slightly to $1.1791, but remained close to the overnight peak of $1.1829.
Sterling was flat at $1.3739, sitting just below Tuesday's high of $1.3787, a level last seen in October 2021.
The dollar made up a little ground against Japan's currency, adding 0.2 per cent to 143.68 yen, following the prior session's 0.4 per cent slide.
"My base case remains for the greenback to slowly but steadily grind lower over time, as confidence in the idea of monetary policy independence continues to be eroded," Michael Brown, a strategist at Pepperstone, wrote in a client note.
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