Dollar wallows near 3-1/2-year low as Fed cuts, Trump bill in focus

Synopsis

The US dollar is near its lowest since February 2022. Federal Reserve Chair Jerome Powell hinted at possible rate cuts. Donald Trump's spending bill could increase national debt. Trump criticized Powell's monetary policy. The dollar held steady against the Swiss franc. The euro remained flat. Sterling rose slightly. The dollar gained a bit against the yen.

The U.S. dollar hunkered near the lowest since February 2022 against major peers on Wednesday, as traders considered dovish hints from Federal Reserve Chair Jerome Powell, along with the potential impact of President Donald Trump's spending bill.

The greenback was pinned near its weakest since September 2021 on the euro, and was at 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 didn't 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 96.677, but didn't 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% and Denmark's 1.75%, and telling him he was "as usual, 'too late.'"

The greenback held steady at 0.7906 Swiss franc, after dipping as low as 0.7873 franc in the previous session.

The euro was flat at $1.1802, sticking close to the overnight peak of $1.1829.

Sterling edged up slightly to $1.37435, approaching Tuesday's high of $1.3787, a level last seen in October 2021.

The dollar made up a little ground against the yen, adding 0.1% to 143.59 yen, following the prior session's 0.4% slide.

(Reporting by Kevin BucklandEditing by Shri Navaratnam)

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