Investing.com - The U.S. dollar was hovering near seven-week lows against a currency basket on Wednesday amid growing expectations for a Federal Reserve rate cut in the face of increasing headwinds to the economy caused by trade conflicts.
Fed Chairman Jerome Powell on Tuesday pledged that the central bank will “act as appropriate” to protect the economy from the disruption caused by trade wars, dropping his standard reference to being "patient" in approaching any interest rate decision.
The dollar index against a basket of six peers was little changed at 97.000 by 03:53 AM ET (07:53 GMT), within reach of an overnight low of 96.887, its weakest since April 18. The index has now fallen 1.3% from a more than two-year high of 98.371 touched on May 23.
Masafumi Yamamoto, chief currency strategist at Mizuho Securities, said major currencies barely reacted to Powell's comments as investors had already priced in several rate cuts by the Fed on the back of the shifting global growth outlook.
The Fed chairman's comments came a day after St. Louis Federal Reserve President James Bullard said in a speech that a rate cut may be needed "soon."
Rate cuts by some central banks in recent weeks could potentially signal the start of a global monetary easing cycle to stave off a sharper economic downturn.
"Central banks across the globe are adopting a dovish tone. It's kind of a preemptive move," said Yamamoto.
"It doesn't necessarily mean that the economy is worsening – rather the outlook worsened. It's mainly related to the trade tensions between the U.S. and China and the U.S. and Mexico."
Australia's central bank on Tuesday slashed benchmark cash rates to a record low of 1.25% and signaled willingness to go further if worsening outlook persists.
Last month, New Zealand's central bank cut its benchmark interest rate for the first time in two-and-a-half years as it moved to support a cooling economy and counter global uncertainties.
In South Korea, its central bank last week kept policy settings unchanged but adopted a more accommodative tone while India is expected to cut rates at its policy meeting on Thursday.
On Wednesday, the Australian dollar was up 0.16% to 0.6999 despite data showing that the country’s economy grew at the slowest pace in a decade in the first quarter, underlining the need for aggressive monetary and fiscal stimulus.
The euro was up 0.14% at 1.1265, extending its gains to a fourth session.
Against the yen, the dollar edged higher to 108.23 yen per dollar, within striking distance of a near five-month high of 107.845 - its highest since Jan. 10 - hit during the previous session.
--Reuters contributed to this report