Ammon News - The dollar was on the front foot on Wednesday, but hovered near a three-week low, as the cautious tone from Federal Reserve Chair Jerome Powell kept risk sentiment in check, while the New Zealand dollar weakened at the prospect of a rate cut there.

In the first day of his testimony to Congress overnight, Powell said a rate cut is not appropriate until the Fed gains "greater confidence" that inflation is headed toward the 2% target, setting the stage for Thursday's CPI report for June.

The dollar index , which measures the U.S. currency against six major peers including the euro and yen, was little changed at 105.09, after rising about 0.1% on Tuesday. It had dipped on Monday to the lowest since June 13 following unexpectedly soft U.S. payrolls data.

Meanwhile, the kiwi was 0.51% lower at $0.60940, pulling further away from Monday's three-week high of $0.6171 after the Reserve Bank of New Zealand opened the door to possible rate cuts should inflation slow as expected.

The Australian dollar surged 0.5% against its neighbour to hit NZ$1.1065 for the first time since February 2023. The Aussie eased 0.1% to $0.67345, but was still hovering close to Monday's six-month peak of $0.67615.

The euro was steady at $1.0820, below the near one-month high of $1.0845 it touched on Monday as investors brace for a political deadlock in France in the wake of the shock election win for the country's leftist alliance.

The single currency came under pressure last month after the snap election was called but has since clawed back some of those losses, although investors remain wary of the possible policy impasse.

The dollar rose 0.07% to 161.43 yen as the currency pair traded in a tight range ahead of the Bank of Japan's meeting due at the end of the month.

Sources told Reuters that the BOJ will likely trim this year's economic growth forecast in July but project inflation will stay around its 2% target in the coming years, keeping alive the chance of an interest rate hike this month.

Markets are pricing in a nearly 60% chance of the BOJ raising rates by 10 bps in July.

Reuters