By Kevin Buckland
TOKYO (Reuters) -The U.S. dollar was on the defensive early on Wednesday after comments from Federal Reserve Chair Jerome Powell bolstered wagers on an interest rate cut this month.
The greenback had lost ground to the safe-haven yen and Swiss franc on Tuesday as Washington and Beijing traded volleys in a simmering tariff spat. The euro had also gained on the dollar after the French government proposed suspending landmark pension reforms.
The dollar index, which measures the U.S. currency against those three peers along with three others, was flat at 99.055 as of 0011 GMT, after declining 0.2% in the prior session.
The greenback was steady at 151.80 yen, following a 0.3% slide on Tuesday, and was little changed at 0.8013 franc, having dropped 0.3% overnight.
The euro held firm at $1.1606 after gaining 0.3% in the previous session.
Powell left the door open to cutting rates at the Fed’s policy meeting on October 28-29 by saying the labor market remains mired in its low-hiring, low-firing doldrums, and that the absence of official economic data due to the government shutdown has not prevented policymakers from being able to assess the economic outlook, at least for now.
Markets are currently priced for a quarter-point cut this month and another in December, followed by three more next year, according to LSEG data.
On the global front, the U.S. and China escalated tensions on Tuesday with tit-for-tat fees on shipping firms that move everything from holiday toys to crude oil. President Donald Trump said Washington is considering terminating some trade ties with Beijing, including for cooking oil.
“We consider the U.S.‑China tensions have room to escalate even further,” said Joseph Capurso, head of foreign exchange at Commonwealth Bank of Australia, in particular flagging potential downside for the risk-sensitive Australian dollar.
“President Trump could retaliate at any time.”
The Aussie edged up 0.1% to $0.6491, after falling 0.5% a day earlier, when it touched the lowest since August 22 at $0.64405.
The New Zealand dollar eased 0.1% to $0.5706, extending a 0.2% decline from Tuesday, when it sank to a six-month low of $0.56839.
(Reporting by Kevin BucklandEditing by Shri Navaratnam)
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