Powell said the policy rate, at 2-2.25 percent, is now "just below" the broad range of estimates of neutral, which in September was 2.5-3.5 percent. That contrasts with comments on Oct. 3 when Powell said the Fed might raise rates past neutral, adding that they are probably "a long way" from that point.
"The Fed has not raised the rates in order to gain ground on neutral between Oct. 3 and today, so therefore his view of the economy has declined," said Lou Brien, market strategist at DRW Trading in Chicago.
The dollar has been under pressure in recent weeks on signs that the Fed might reduce the pace of rate increases amid slowing global growth, peak corporate earnings and the escalating trade tensions.
President Donald Trump has also expressed frustration with Fed rate hikes. Trump said in a Washington Post interview on Tuesday that he was "not even a little bit happy" with the Fed chairman and that the central bank's policies are hurting the economy.
Minutes from the Fed's Nov. 7-8 meeting, to be released on Thursday, will next be evaluated for further indications of how many more times the U.S. central bank is likely to hike interest rates.
Investors are also focused on the G20 summit in Buenos Aires on Friday and Saturday, where Trump and his Chinese counterpart, Xi Jinping, are scheduled to discuss contentious trade matters.
Trump said this week that it was "highly unlikely" he would accept China's request to hold off a planned increase in tariffs. That drove investors to safe-haven currencies such as the dollar.
Sterling saw brief losses after the Bank of England warned that Britain risks a bigger hit to its economy than during the global financial crisis a decade ago if it leaves the European Union in a "disorderly" manner, which would include a 25 percent decline in the value of the British pound.
The move was overturned by dollar weakness after Powell's comments.