Investing.com - The U.S. dollar edged higher on Wednesday in Asia as investors tempered expectations for aggressive rate cuts by the Federal Reserve.
The U.S. dollar index gained 0.2% to 95.808 by 12:25 AM ET (04:25 GMT), coming off a three-month low of 95.36 reached on Tuesday.
Expectations for a half percentage point cut at the Fed’s July meeting receded after St. Louis Fed President James Bullard said Tuesday that such a move "would be overdone".
Separately, Fed Chairman Jerome Powell said the central bank is "insulated from short-term political pressures," pushing back against U.S. President Donald Trump's demands for a significant rate cut.
The comments tempered expectations for aggressive easing, but investors are still expecting at a quarter percentage point cut next month.
Gains in the greenback were held in check, as traders remained cautious ahead of the upcoming G-20 summit over the weekend. Trump and Chinese leader Xi Jinping are expected to meet on the sidelines of the summit to discuss trade-related issues. Trump said he expected a productive meeting with Xi, but markets do not expect a trade deal to be reached this weekend.
Meanwhile, the AUD/USD pair was up 0.2% to 0.6964. Australian Prime Minister Scott Morrison warned that countries should not “just sit back and passively await our fate” amid the ongoing Sino-U.S. trade war.
“The collateral damage is spreading,” Morrison said in a speech. “The global trading system is under real pressure. Global growth projections are being wound back.”
Australia is vulnerable to heightened trade tensions between the U.S. and China, its biggest trading partner.
The USD/CNY pair also gained 0.2% to 6.8897.
The USD/JPY pair was up 0.3% to 107.47.