NEW YORK: The greenback gained slightly on Thursday as investors continued to digest comments from Federal Reserve Chairman Jerome Powell on Wednesday that took a more dovish turn than expected and sent the dollar tumbling.
Powell said that the central bank's policy rate is now "just below" estimates of a level that neither brakes nor boosts a healthy US economy, comments that many investors read as signaling the Fed's three-year tightening cycle is drawing to a close.
Interest rate futures traders are now pricing for only one rate hike in 2019, according to the CME Group's FedWatch Tool, below Fed projections of three increases during the year.
"You saw a pretty massive repricing yesterday of Fed expectations and the dollar and markets may have overreacted a little bit to it," said Erik Nelson, a currency strategist at Wells Fargo in New York. "The room for downward repricing in Fed expectations from here may be kind of limited."
The dollar index was last up 0.04 percent on the day at 96.823.
Minutes from the Fed's Nov. 7-8 meeting, to be released at 2 p.m. EST (1900 GMT), will next be evaluated for further indications of how many more times the US central bank is likely to hike interest rates.
The greenback weakened earlier on Thursday after data showed that inflation slowed in October, despite a jump in consumer spending.
The personal consumption expenditures (PCE) price index excluding the volatile food and energy components edged up 0.1 percent after increasing 0.2 percent in September.
The tepid inflation "takes some pressure off the Fed at the margin," said Nelson.
Consumer spending, which accounts for more than two-thirds of US economic activity, jumped 0.6 percent last month as households spent more on prescription medication and utilities.
Investors are also focused on the G20 summit in Buenos Aires on Friday and Saturday, where Trump and his Chinese counterpart, Xi Jinping, are scheduled to discuss contentious trade matters.
Trump said on Thursday said there was "a long way to go" on tariffs with China and urged companies to build products in the United States to avoid them.
Elsewhere, the pound lost about 0.4 percent against the dollar on concern about the UK parliament's vote on Brexit and after the Bank of England warned of risks to the currency if Britain leaves the European Union in a disorderedly manner.