Dollar pinned near three-week low as U.S payrolls test looms

© Reuters. FILE PHOTO: A U.S. dollar banknote is seen in this illustration taken May 26, 2020. REUTERS/Dado Ruvic/Illustration/File Photo

By Kevin Buckland

TOKYO (Reuters) - The dollar traded near its lowest point in nearly three weeks versus major peers on Wednesday, with investors focused on a key U.S. jobs report due on Friday for clues on when the Federal Reserve might begin paring stimulus.

The dollar index, which measures the greenback against six rivals, edged higher to 92.751 from Tuesday, when it dipped as low as 92.395 for the first time since Aug. 6.

The U.S. currency was about flat at $1.18015 per euro, after touching the weakest since Aug. 5 at $1.1845 in the previous session.

It rose 0.17% to 110.18 yen, but remained near the middle of the trading range that has prevailed since early July.

The dollar index climbed as high as 93.734 for the first time in 9 1/2 months on Aug. 20, but has since sagged as commentary from Fed officials suggested a taper wasn't imminent, beginning with Dallas Fed President Robert Kaplan, a well-known hawk, saying he might reconsider the need for an early start to tapering if the pandemic harms the economy.

Last Friday, Fed Chair Jerome Powell acknowledged in his speech at the Jackson Hole conference that tapering could begin this year, but added the central bank is in no hurry to raise interest rates.

Cleveland Fed President Loretta Mester told Reuters on Monday that she is not yet convinced recent inflation readings will satisfy the central bank's price stability goal.

Meanwhile, data overnight showed U.S. consumer confidence slumping to a six-month low as soaring COVID-19 infections dampened the economic outlook.

This Friday, economists predict nonfarm payrolls likely increased by 750,000 last month, after rising 943,000 in July. The unemployment rate is forecast to fall to 5.2% from 5.4%.

The Fed has made a labour market recovery a condition for tapering.

"The USD uptrend is over for the time being at least," after Powell successfully separated the debate over taper timing from any decisions about higher rates, Ray Attrill, head of foreign exchange strategy at National Australia Bank (OTC:NABZY) in Sydney, wrote in a client note.

"Positive price action" in the Australian and New Zealand dollars since their Aug. 20 lows suggests "a base has now been formed for both two currencies," he said.

The Aussie was little changed at $0.73095 after touching a more-than-two-week high of $0.7341 on Tuesday. It was as low a $0.71065 on Aug. 20, a level not seen since early November.

New Zealand's kiwi slipped 0.15% to $0.7036, but remained close to its highest since Aug. 5 of $0.70685, reached the previous day. It dipped to $0.6807 on Aug. 20, also a more-than-nine-month low.