Dollar in holding pattern before Jackson Hole, kiwi drops on dovish RBNZ
The New Zealand dollar tumbled after the central bank reduced its cash rate by a quarter point to 3.0% as expected, and said its board had also considered a half-point cut.
The dollar index, which measures the U.S. currency against six others, was down less than 0.1% at 98.265, after earlier touching a more than one week high of 98.441.
Friday's speech by Powell is the market's main focus, as traders watch for any pushback against market pricing of a rate reduction at the Fed's September 16-17 meeting.
Traders now place odds of about 85% on a quarter-point cut next month and expect about 54 basis points of reductions by year-end.
"Powell will try to be fairly balanced, but there is a risk we see a hawkish Powell on Friday," said Kirstine Kundby-Nielsen, FX analyst at Danske Bank.
"Some of the developments we've seen in inflation dynamics will keep the Fed more cautious."
Traders, who ramped up bets for Fed cuts after a surprisingly weak U.S. payrolls report at the start of this month, were further encouraged after consumer price data showed limited upward pressure from tariffs.
However, a hotter-than-expected producer price reading last week complicated the policy picture.
Powell has said he is reluctant to cut rates because of expected tariff-driven price pressures this summer.
Later on Wednesday, the Fed will issue the minutes of its meeting on July 29 and 30, when it held rates steady, although they may offer limited insight as the meeting came before the weak jobs numbers.
The kiwi slumped as much as 1.3% to $0.5815, its weakest since April 11, with policymakers lowering their projected floor for the cash rate to 2.55%, from 2.85% forecast in May.
"The market did not expect the bank to send a strong dovish signal that it intends to deliver further cuts," Prashant Newnaha, a rates strategist at TD Securities, wrote in a client note. He has increased his forecast for additional easing, now projecting a cash rate of 2.5% by November.
The Swedish crown was steady after its central bank maintained its policy rate at 2%, in line with expectations.
The euro was little changed at $1.1647. The greenback retreated 0.1% to 0.8073 Swiss franc and edged down 0.2% to 147.48 yen.
The pound rose held broadly steady against the euro and dollar after hotter-than-forecast inflation, leaving Britain with the biggest price growth problem amongst the world's big rich economies.
But much of the rise in services inflation was driven by volatile air fares, which some economists said was due to the timing of school holidays.
"The BoE (Bank of England) is more concerned about food inflation, which hasn't changed much in today's release," ING's head of research Chris Turner said.
"We doubt today's CPI release will alter much of the BoE's current thinking."
In cryptocurrencies, bitcoin hovered at around $113,537 after earlier dipping to the lowest since August 3 at $112,578.38, pressured by a strengthening dollar.
Ether was up 1.2% at $4,207.
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