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Investing.com - The U.S. dollar edged higher Wednesday, trading in tight ranges ahead of the conclusion of the latest Federal Reserve meeting as well as announced trade talks between the U.S. and China.
At 04:45 ET (08:45 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, gained 0.2% to 99.225, bouncing after recent hefty losses.
Dollar helped by trade talks
The greenback has seen some buying Wednesday following the news that Treasury Secretary Scott Bessent and chief trade negotiator Jamieson Greer will meet China’s top economic official in Switzerland on Saturday.
The dollar suffered heavy losses in April after U.S. President Donald Trump launched his “reciprocal” tariffs against many of his country’s major trading partners, including most significantly China.
Although any trade deal will take time to negotiate, the fact that the two sides are prepared to talk has helped the beleaguered buck Wednesday.
“Remember that in April, the defensive yen and Swiss franc currencies were the big beneficiaries of ’reciprocal’ tariffs and the uniform sell-off in US asset markets. In theory, then, de-escalation should see USD/JPY and USD/CHF lead the recovery,” said analysts at ING, in a note.
That said, gains are limited ahead of the conclusion of the latest Federal Reserve policy-setting meeting later in the session.
The U.S. central bank is widely expected to keep rates unchanged, putting the focus on Fed chair Jerome Powell’s accompanying comments for clues on the potential impact on the economy of the Trump administration’s trade policies as well as the future path of interest rates.
“We doubt this will prove a major market mover as the Fed continues to resist presidential pressure to cut rates,” said ING. “It seems the market is comfortable enough waiting for the next Fed rate cut in July, while also waiting on the hard data to determine how deeply the Fed cuts.”
Euro shows resilience
In Europe, EUR/USD traded largely unchanged at 1.1367, after German industrial orders rose 3.6% on the month in March, more than expected after posting their first increase this year.
The single currency had received a hit after Friedrich Merz was elected Germany’s chancellor on his second attempt Tuesday, following an unexpected failure in the first round of parliamentary voting.
The outcome marked the first time in Germany’s postwar history that a chancellor candidate did not secure confirmation on the initial ballot.
“His failure in the first confirmation round in the German parliament yesterday did briefly send EUR/USD back to 1.1310, but EUR/USD is proving quite resilient,” ING added.
GBP/USD edged 0.2% lower to 1.3352, ahead of this week’s policy meeting by the Bank of England, with the central bank widely expected to cut rates by 25 bps.
Yuan slips on PBOC cut
Elsewhere, USD/JPY traded 0.6% higher to 143.33, with the safe-haven yen retreating on the announcement of trade talks between the U.S. and China.
USD/CNY traded 0.1% higher to 7.2257, after the People’s Bank of China said it will cut its benchmark repurchase rate by 10 basis points to 1.40%, while its reserve requirement ratio will fall by 50 bps to 6.2%.
The move is aimed at further bolstering the Chinese economy with monetary support, as it grapples with increased headwinds from a trade conflict with the United States.