Dollar sits near two-year lows ahead of Fed policy meeting

The dollar sat near two-year lows on Wednesday as the United States struggled to control the coronavirus outbreak, breaking hopes for a fast economic recovery.

The gloomy outlook for the U.S. economy is expected to urge the Federal Reserve to stick to a pacifist stance in its policy review later today.

The dollar index sat at 93.720, nearing its lowest level since June 2018. The euro stood at $1.1723, while the dollar traded at 105.05 on the yen.

The dollar’s weakness spread as investors’ perception of a stronger U.S. economic growth compared to other developed economies was quickly eroded by the continuous surge of U.S. COVID-19 cases.

Investors are closely watching for indications that the Federal Reserve is changing its policies at its two-day meeting on Wednesday. Meanwhile, some market players are betting that the dollar is due for an imminent rebound after the Fed’s unprecedented money-printing since March.

The Fed’s balance sheet grew nearly $3 trillion to $7.17 trillion, much bigger than other central banks as financial institutions sought dollar liquidity during the lockdowns, though those numbers shrank in recent weeks.

Also weighing on the dollar was the deadlock on the U.S. coronavirus fiscal package still debated in the Senate.

The pound traded at $1.2931. The Aussie stood at $0.7170, right below its 15-month high of $0.7184 a week ago.