Dollar Dilemma: Fed Hints at Rate Cuts Amid Global Tensions

The U.S. dollar struggles following Fed Chair Powell's comments on potential rate cuts. Amid global trade tensions, the dollar lost ground against the yen and franc, while the euro gained. The Fed may cut rates in October, with additional cuts expected this year. U.S.-China trade tensions further impact currencies.

The U.S. dollar faced challenges early Wednesday, reacting to Federal Reserve Chair Jerome Powell's signals that a rate cut could happen this month. This possibility gained traction after Powell's comments, adding pressure on the greenback amid an ongoing trade spat between the U.S. and China.

On Tuesday, the dollar weakened against safe-haven currencies like the yen and Swiss franc, while the French government's pension reform suspension boosted the euro. Despite this turmoil, the dollar index maintained stability at 99.055, following a 0.2% drop previously.

Globally, U.S.-China tensions intensified with mutual tariffs, impacting markets. President Trump hinted at severing some trade relations, potentially exacerbating risks for the Australian dollar. Meanwhile, the New Zealand dollar continued its decline, reaching a six-month low.

(With inputs from agencies.)