FOREX-Dollar sags as investors brace for dovish Fed signals

* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Hideyuki Sano
TOKYO, Aug 27 (Reuters) - The dollar wallowed near its
lowest level for the week on Thursday as investors looked for
hints from Federal Reserve Chairman Jerome Powell that the
central bank might tweak its policy framework to help push up
inflation.
Powell is scheduled to address the Fed's annual central
bankers' conference later in the day, usually held in Jackson
Hole, Wyoming, but being conducted virtually this year because
of the COVID-19 pandemic.
Investors are betting the U.S. central bank will introduce a
new policy framework to fight persistently low inflation as
early as next month.
"If the Fed turns out to be less dovish than many have been
thinking, we could see a rally in the dollar," said Kyosuke
Suzuki, director of forex at Societe Generale in Tokyo.
The dollar's index against six major currencies =USD stood
at 92.893, near the weakest level so far this week, and not far
off its two-year low of 92.124 touched last week.
Since the start of the pandemic, the Federal Reserve has
expanded its balance sheet by as much as about $3 trillion, far
more than the European Central Bank and the Bank of Japan.
The euro changed hands at $1.1833 EUR= , near its highest
level so far this week, though few market players expect a clear
break from its range so far this week ahead of Powell's speech.
The dollar slipped to 105.97 JPY= , losing steam after
hitting a one-week high of 106.58 on Tuesday.
"A more aggressive Fed policy tends to weaken the dollar,
and the broadcasting of this policy change has already been a
factor in the recent mild yen strength," said John Vail, chief
global strategist at Nikko Asset Management.
Another key focus for the yen is Prime Minister Shinzo Abe's
news conference scheduled for Friday amid rising speculation
over his health. The yen is likely to gain should Abe decide to resign, given
perception that aggressive monetary easing with close
co-operation between the government and the central bank, dubbed
Abenomics, has been one of his trademark policies, traders said.
The British pound stood firm at $1.3211 GBP=D4 , having
gained 0.9% since the start of week, while the Australian dollar
AUD=D4 was changing hands at $0.7238 AUD=D4 up 1.1% so far
this week.
The Chinese yuan was at its strong levels since January
after data showed a recovery in profits at China's industrial
firms. The offshore yuan stood at 6.8783 per dollar CNH= , near
its highest level since Jan. 21.
The market appears to have shrugged off the latest signs of
rising tension between the two countries.
The United States on Wednesday blacklisted 24 Chinese
companies and targeted individuals it said were part of
construction and military actions in the South China Sea, its
first such sanctions move against Beijing over the disputed
strategic waterway.