LONDON: The dollar fell to a five-day low on Thursday after Federal Reserve Chair Jerome Powell kept the door open for U.S. interest rate cuts, though investors were wary of selling dollars aggressively until a policy review later this month.

In testimony to Congress, Powell pointed to "broad" global weakness that was clouding the U.S. economic outlook amid uncertainty about the fallout from the trade conflict with China and other nations.

His comments did little to change market expectations -- money markets expect one rate cut later this month and a cumulative 68 basis points of cuts until the end of 2019 -- but market watchers said Powell's views will drive the dollar.

"Once we get a quarter-point rate cut, which markets are widely expecting, Powell will keep all options open on the table, and that means the dollar's outlook is uncertain," said Manuel Oliveri, an FX strategist at Credit Agricole in London.

Against a basket of other currencies, the dollar fell 0.2% to 96.83, its lowest since July 5 and near the three-month low of 95.84 from late June.

Uncertainty about the dollar's outlook prompted some investors to unwind short positions against some heavily shorted currencies, such as the Australian dollar, which rose 0.2% in early London trading.

Latest positioning data showed that hedge funds had built up a large short position in the Australian dollar in recent weeks because of the trade tensions between Washington and Beijing.

In contrast, hedge funds had rapidly unwound large long positions in the dollar, especially against a basket of major and emerging-market currencies, anticipating U.S. rate cuts.

Elsewhere, the British pound rose from six-month lows to $1.2529. But it remains down for the week, amid Britain's economic gloom and a fast-approaching Brexit deadline. - Reuters