The U.S. dollar fell on Wednesday to a four-month low against a basket of currencies after the Federal Reserve held interest rates steady and Fed Chair Jerome Powell said a significant, persistent inflation rise would be needed to hike rates.
The Fed left the benchmark overnight lending rate in its 1.50% to 1.75% target range, and the U.S. central bank's rate-setting committee said after its two-day policy meeting that it expects moderate economic growth and low unemployment through next year's presidential election.
"A Fed determined to maintain an accommodative financial environment seems to finally be playing against the greenback," said Juan Perez, senior currency trader with Tempus, Inc. in Washington.
Rate increases are less needed than in the mid- 1990's rate-cut cycle, Powell told a news conference.
"The bar to a rate hike remains higher than the bar to lowering rates further, but overall you are looking at a Fed that is fairly confident about where the economy is headed and expects inflation to remain under pressure for a prolonged period of time," said Karl Schamotta, chief market strategist at Cambridge Global Payments in Toronto.
The dollar index, which measures the greenback against six other major currencies, was 0.33% lower at 97.095, its lowest since Aug. 9.
"Market participants are going to keep an eye out for the European Central Bank meeting tomorrow, but mostly will remain focused on what happens on Saturday with respect to U.S.-China trade negotiations," Schamotta said.
U.S. President Donald Trump has set Dec. 15 as the date to impose tariffs on nearly $160 billion in Chinese consumer goods. Washington is laying the groundwork to delay tariffs, a person briefed on the situation told Reuters, although there is no clarity on what the decision will be.
"If we do see a delay in tariffs, that clears the way for other currencies to rise relative to the dollar," Schamotta said.
The euro was 0.4% higher ahead of new ECB boss Christine Lagarde's first policy meeting on Thursday. Investors will scrutinize her every word.
Elsewhere, Sweden's crown jumped to a more than four-month high against the dollar after strong inflation data made it highly likely the country would end negative interest rates. The dollar was 1.16% lower against the Swedish crown.
In another notable move, the Hong Kong dollar rallied to its strongest level since July 24, which analysts attributed to the unwinding of bets previously profiting from "carry trades" - borrowing with low interest rates in Hong Kong to purchase U.S. dollar-denominated assets.
The greenback was 0.24% lower against the Hong Kong dollar. . Hong Kong's currency is pegged to the greenback at a tight range of 7.75-7.85 per dollar and the city's monetary policy moves lock-step with the United States.
The pound was 0.37% higher in thin trading on the eve of Britain's general election, shrugging off a poll that showed the ruling Conservative Party might fail to win a majority.