NEW YORK (Reuters) – The dollar edged lower on Wednesday but stayed within a relatively tight range a day ahead of a highly anticipated speech by Federal Reserve Chairman Jerome Powell.
Powell is scheduled to address the U.S. central bank’s policy framework review, and investors are focused on whether he will hint at shifting the Fed’s inflation target to an average.
“Targeting average inflation over time rather than setting a fixed 2% goal would likely mean lower rates for longer,” said Raffi Boyadjian, senior investment analyst at online broker XM. “If the Fed confirms such a move, the greenback would stand little chance of a meaningful rebound anytime soon.”
The Fed is thought to be still finalizing details of its review, however, with an announcement expected at its September meeting.
That risks leaving investors disappointed on Thursday if Powell does not indicate the change is likely.
“The risk is that the market’s disappointed with what Powell has to say, and if that is the case you could see the unwind of dollar shorts,” said Bipan Rai, North American head of FX strategy at CIBC Capital Markets in Toronto.
The dollar index, which tracks the greenback’s value against a basket of currencies <=USD> fell 0.05% to 92.95.
The index earlier hit a session high of 93.37 after data showed that U.S. durable goods orders increased more than expected in July.
The euro <EUR=> dipped 0.11% against the greenback to $1.1820.
The yuan <CNH=> rose toward a seven-month high at $6.879 after U.S. and Chinese trade officials reaffirmed their commitment to a Phase 1 trade deal, which eased concerns about a diplomatic standoff between the world’s two-largest economies.
(Reporting by Karen Brettell; additional reporting by Julien Ponthus in London; editing by Jonathan Oatis and Alistair Bell)
