The dollar fell to a five-week low against major currencies on Friday on speculation the Federal Reserve will emphasize next week its intention to keep interest rates low for longer.
The Fed holds its two-day monetary policy meeting Tuesday and Wednesday. A Wall Street Journal report suggested the U.S. central bank may debate changing its forward guidance on rates to hammer home that it will not be raising borrowing costs any time soon.
Analysts said this could keep the dollar on the defensive in the near term, but losses will likely be limited before a deluge of economic data releases next week, which include non-farm payrolls for July and the Institute for Supply Management indexes for the manufacturing and service sectors.
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"Folks are just treading water. They just want to see the big numbers next week to get some directional guidance," said Samarjit Shankar, director of market strategy at BNY Mellon in Boston.