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The Fed could deliver some much-needed relief for the greenback

Will the Fed breathe fresh life into the dollar?

The dollar has struggled this year, but some strategists say the currency could rise as the Federal Reserve signals further interest rate hikes.

On Wednesday, Fed Chair Janet Yellen sounded more dovish in tone, and said interest rates likely do not need to rise substantially higher to achieve the central bank's goals around monetary policy normalization.

"Because the neutral rate is currently quite low by historical standards, the federal funds rate would not have to rise all that much further to get to a neutral policy stance," Yellen said in prepared remarks.

Still, she still pointed to higher short-term rates, adding that "because we also anticipate that the factors that are currently holding down the neutral rate will diminish somewhat over time, additional gradual rate hikes are likely to be appropriate over the next few years to sustain the economic expansion and return inflation to our 2 percent goal."

The dollar index tracks the U.S. currency's strength against a basket of major currencies primarily comprised of the euro. For that reason, looking at U.S. monetary policy in isolation tends not to be as useful as comparing U.S. policy to European monetary policy.

"Relatively speaking, I do think the dollar will continue to look better," Win Thin, global head of emerging market currency strategy at Brown Brothers Harriman, said Tuesday on CNBC's "Trading Nation." "Remember, rates in Europe are still negative, so they have a big hole to dig out of."

Thin said he remains bullish on the dollar despite its 6 percent decline this year, and that one of the biggest drivers behind what he calls this "stalling" in the currency is a handful of recent soft U.S. economic data.

Indeed, some of the recent figures — average hourly wage growth, auto sales and the U.S. consumer price index, often used as an inflation measure — have disappointed recently, perhaps contributing to a weaker dollar.

Such weakness in the so-called hard data might make investors question what the Fed's next move is, he said, or how the dollar will fare. However, Thin noted the market is pricing in a 40 percent chance of another interest rate hike by year's end, and "in between, we are probably going to see some balance sheet tapering."

Other central banks are indeed going to begin tightening, he said, but the Fed is still "ahead of the game" when it comes to tightening monetary policy, with another likely hike. The Bank of Canada hiked interest rates Wednesday morning, as was widely expected.

Higher interest rates traditionally translate into a boost for a country's respective currency, since higher rates make it more attractive to store wealth in that currency.

Influence from the European Central Bank will play a meaningful role in the dollar's value at this juncture, agreed Dennis Davitt, a portfolio manager at Harvest Volatility Management. The ECB, led by President Mario Draghi, has recently been a bit more hawkish in its rhetoric around monetary policy.

"If we see [the ECB] pull back on their bond buying ... if we see inflation creep into Europe ... that's going to have far more of an effect on the U.S. than the next Fed chairman," Davitt said Tuesday on "Trading Nation."

Furthermore, on the domestic front, "it just looks like any part of the Trump agenda that made the dollar rally is running into headwinds right now," given that the Donald Trump policies that some predicted would increase U.S. economic growth appear to be stalled.

Indeed, the dollar index slipped on Tuesday as a year-old email chain between President Donald Trump's son, a Trump campaign official and a Russian lawyer were released.