The dollar edged higher on Wednesday after dipping to its lowest level against the euro this year, as traders waited for revisions to U.S. employment data and an upcoming speech by Federal Reserve Chair Jerome Powell.

 

The euro had climbed to $1.1132 overnight, its highest since December, driven by growing investor bets on Fed rate cuts this year. This pushed down U.S. bond yields and weighed on the dollar, which eventually found a footing, leaving the euro down 0.15% at $1.1113.

 

Analysts have pointed to concerns about the economy and anticipation around the revision of U.S. non-farm payrolls data as key factors driving the drop in yields, which in turn weakened the dollar.

 

Later on Wednesday, the Bureau of Labor Statistics is expected to release revised employment figures covering April 2023 to March 2024, based on tax data.

 

"With inflation slowly converging to target, financial markets are increasingly sensitive to recession concerns, and thus a downward revision of job numbers could bring about another risk-off episode," said Michiel Tukker, senior European rates strategist at ING.

 

A weak Aug. 2 payrolls report had led traders to anticipate a significant rate cut by the Fed at its mid-September meeting. However, recent better-than-expected economic data has flipped those odds, with traders now assigning only a 28% chance of a larger rate reduction.

 

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

 

Sterling, which rose to its highest level since July 2023 on Tuesday at $1.3054, has since held steady at $1.3033.

 

Jane Foley, head of FX strategy at Rabobank, suggested that the dollar’s decline might be partly due to thin summer trading, with many traders away on vacation. Markets are now awaiting Powell's keynote speech on Friday at the Jackson Hole summit for any indications of future rate cuts.

 

In a volatile session, the dollar initially fell 0.21% against the yen to 144.945, before recovering to trade 0.59% higher at 146.09 yen.

 

Traders are also keeping an eye on Japan’s parliament session on Friday, where Bank of Japan Governor Kazuo Ueda will testify on the central bank's recent interest rate hike and sudden hawkish turn.

 

Australia's dollar dipped slightly from a one-month high of $0.6749 on Tuesday, last trading at $0.6739.