Dollar lower again as investors wait for Fed

NEW YORK (CNNMoney.com) -- Currency investors are bracing for dynamic changes to monetary and fiscal policy that could come next week.

Election night is Tuesday, and Republicans are expected to retake control of the House of Representatives, which could lead to a change in how much the federal government spends on economic stimulus.

But for the currency market, the bigger story is on Wednesday with a widely anticipated policy announcement from the Federal Reserve. The central bank is expected to unveil a new round of asset purchases at its policy meeting, a two-day session that wraps up on November 3.

"Investors are wondering if the Fed program is going to be one big hit of shock and awe, or if it'll be incremental," said Kevin Chau, foreign currency analyst at IDEAGlobal.

That purchase program, which is called quantitative easing, is meant to help stimulate the economy. But QE is generally viewed as bad for the dollar, because the Fed would be essentially printing money to pay for the long-term bonds it plans to buy.

Investors who want the dollar to rally are hoping for one of two options, Chau said: either the Fed says it plans to buy fewer bonds than speculated, or the program rolls out slowly.

The dollar has been mired in a sell-off over the past few weeks amid concerns of a currency war with countries like China, which have allowed their currencies to trade at artificially low levels.

The greenback has been punished on currency war concerns, as well as worries about the Fed. The dollar has continued to drift downward this week..

"Over the past week, people have been trying to position themselves," Chau said. "But we're stuck in a rut. We just don't know what's coming."