The U.S. dollar rose from early lows on Wednesday as investors wary of wider geopolitical risks sought its relative safe haven ahead of midday remarks by Federal Reserve Chair Jerome Powell.
Sentiment was driven by record-high coronavirus infections in six U.S. states, new cases of the disease in Beijing, and clashes between Indian and Chinese troops in the western Himalayas.
Fed Chair Powell will speak at noon EDT (1600 GMT) in his second day of remarks to U.S. lawmakers. On Tuesday, Powell tamped down some recent market optimism with a bleak U.S. economic picture, while reinforcing hopes for continued policy support.
The dollar edged 0.27% higher to 97.25 against a basket of currencies, lifting it nearly 0.5% from the day's lows.
"Underlying dollar sentiment remains hazy, though as the Fed chairman, who speaks again today on Capitol Hill, warns that risks remain to the economic outlook and that the economy isn't out of the woods," wrote Joe Manimbo, senior market analyst at Western Union Business Solutions.
The dollar index has recovered from a three-month low last week, but the outlook for the safe-haven currency looks weak as U.S. economic data has begun to recover and stock indexes have soared.
"The broad dollar outlook remains negative as investors are cutting back on some of the extreme tail risk hedging bets in the markets, some of which were buying dollars," said Ilan Solot, a currency markets strategist at Brown Brothers Harriman.
Powell on Tuesday said that a full U.S. economic recovery will not occur until Americans are sure the coronavirus pandemic has been brought under control. That remains far from certain, with new infections hitting record highs on Tuesday in six U.S. states, including Texas and Florida.
China has also sharply ramped up restrictions on people leaving Beijing in an effort to stop the worst coronavirus flare-up since February from spreading.
The Fed's cautious message also checked momentum in the euro , which held well below a three-month high of $1.142 hit last week. It was trading at $1.122 on Wednesday, down 0.35% after rallying nearly 5% since a Franco-German proposal for a recovery fund in late May.
