The dollar slipped on Thursday, but moved within narrow ranges, as investors awaited a possible announcement or statement from the Federal Reserve at this week's Jackson Hole, Wyoming event to address the worsening global economic outlook.
Market participants said the Fed could announce a stimulus measure, or re-affirm the US central bank's easing stance, a scenario viewed as negative for the dollar.
Fed Chairman Jerome Powell will speak on Friday and some say he may clarify the Fed minutes released on Wednesday and deliver a dovish speech that would soothe market worries about the prospect of recession.
But Powell could also push back against expectations of aggressive US interest rate cuts, especially after two Fed officials said they saw no need for easing at this time.
Kansas City Fed President Esther George and Philadelphia Fed President Patrick Harker said on Thursday the US central bank currently does not need to deliver more stimulus to the economy after it cut rates for the first time in more than a decade last month.
"There is a risk that Powell, whose comments were laced with optimism after the last FOMC meeting, may downplay chances of a rate cut even though the market is fully pricing it next month," said Kathy Lien, managing director of FX strategy, at BK Asset Management in New York.
"That kind of ambiguity is kind of the reason why we're not seeing major upticks in trading ranges in the currency market."
The Fed's latest minutes confirmed a growing view US policymakers are reluctant to launch a major rate-cutting cycle in the coming months, describing the July easing as a mid-cycle adjustment.
Fed policymakers were divided over whether to reduce rates but united in wanting to signal they were set on more cuts, minutes of the meeting showed.
Edward Moya, senior market analyst at OANDA in New York thinks Jackson Hole will provide an opportunity for the Fed to correct what he believes is a "communication mistake" in the minutes.
"With the rest of the world going negative in interest rates, the risk is for that scenario to happen in the US," Moya said. "And if we don't see the Fed become a little more aggressive through no fault of the US economy...they could see more pressure to deliver rate cuts."
In afternoon trading, the dollar slipped 0.2% against a basket of major currencies to 98.148.
The greenback also fell 0.2% against the yen to 106.41 yen, not far from last week's eight-month low around 105.05.
The euro, meanwhile, was little changed against the dollar, at $1.1086 amid an uptick in euro zone business growth.
Euro zone business growth picked up in August, as services expanded and manufacturing contracted at a slower pace. But trade war fears knocked future expectations to their weakest in over six years, a survey showed.