The U.S. dollar edged higher on Wednesday after touching its lowest level against the euro this year, as traders anticipated revisions to U.S. employment data and remarks from Federal Reserve Chair Jerome Powell.

 

The euro had reached $1.1132 overnight, its highest level since December, as expectations of Fed rate cuts weighed on U.S. bond yields and pressured the dollar. However, the dollar managed to recover slightly, bringing the euro down to $1.1113.

 

Market analysts pointed to economic concerns and the anticipated revision of U.S. non-farm payrolls data, due later on Wednesday from the Bureau of Labor Statistics, as reasons for the earlier decline in yields and the dollar.

 

"With inflation moving closer to target levels, financial markets are more sensitive to recession fears, and a downward revision in job numbers could prompt another wave of risk aversion," said Michiel Tukker, senior European rates strategist at ING.

 

Earlier this month, a disappointing payrolls report had led to speculation that the Fed might cut rates significantly at its mid-September meeting. However, stronger economic data since then has reduced those expectations, with the probability of a larger rate cut now seen at 28%.

 

The U.S. dollar index, which fell to 101.30 overnight, its lowest since the start of the year, was last up 0.15% at 101.53.

 

Sterling, which climbed to $1.3054 on Tuesday, its highest since July 2023, was steady at $1.3033 on Wednesday.

 

Jane Foley, head of FX strategy at Rabobank, noted that the dollar’s earlier decline might be due to thin trading conditions with many traders on summer vacation. Markets are now focused on Powell’s speech at the Jackson Hole summit on Friday for any clues about future rate cuts.

 

The dollar was volatile against the yen, initially falling 0.21% to 144.945, before rebounding to 146.09 yen.

 

Traders are also watching Japan’s parliament session on Friday, where Bank of Japan Governor Kazuo Ueda will testify about the central bank’s recent interest rate hike and shift to a more hawkish stance.

 

Australia’s dollar, which hit a one-month high of $0.6749 on Tuesday, last traded at $0.6739.