The US Dollar inched up on Tuesday but lacked strong momentum, as traders stayed watchful for possible coordinated currency intervention by US and Japanese authorities and awaited Wednesday’s Federal Reserve interest rate decision.
Recent attention in the forex market has largely centred on the Yen, which has surged nearly 3% over the past two sessions amid speculation that the US and Japan may conduct rate checks, a move often viewed as a precursor to formal intervention.
This has helped the Yen stabilise around 153–154 per Dollar, well above Friday’s low of 159.23. It was trading at 154.75 at the time of writing, with the Dollar up around 0.4% against the Yen.
Although neither Japanese nor US officials have confirmed any rate checks, a source familiar with the matter told Reuters news agency that the New York Federal Reserve consulted with dealers on Dollar/Yen rates last Friday.
Meanwhile, senior Japanese officials stated on Monday that they have been closely coordinating with the US on foreign exchange matters.
The potential for intervention has made investors cautious about pushing the Yen lower, despite ongoing concerns over Japan’s fiscal health. Analysts also noted that the threshold for coordinated intervention remains high.
Bank of Japan money market data suggested that Friday’s sharp rise in the Yen against the Dollar was unlikely to have resulted from Japanese intervention.
In addition, the Dollar has faced significant pressure from several factors, including Washington’s preference for a weaker currency and uncertainty surrounding US President Donald Trump’s policy decisions. This dynamic could resurface on Wednesday following the Federal Reserve’s interest rate decision.
“We have a Fed meeting tomorrow, and we think the market's going to remain pretty tentative ahead of that event. The big risk, as we see it, is not in the rate decision. We're pretty confident that the Fed is going to hold rates unchanged. But Trump is not going to like that,” said Nick Rees, head of macro research at Monex.
Trump could name his pick to succeed Fed Chair Jerome Powell shortly after the rate decision, particularly if he disagrees with the central bank’s move, Rees said.
“We think that's going to inject some significant dollar volatility,” he added.
The Trump administration’s criminal probe of Powell and ongoing efforts to remove Fed Governor Lisa Cook will also be under scrutiny during the Fed’s two-day policy meeting beginning on Tuesday.
The Dollar rose for the first time in four days against a basket of currencies, gaining 0.2% to 97.27. It has fallen about 1% since the start of the year and touched a four-month low of 96.808 on Monday.
The Euro fell 0.2% to $1.1855, staying close to Monday’s four-month high of $1.19075. Sterling edged down 0.07% to $1.3668, remaining near the previous session’s four-month peak of $1.37125.
Whereas the Australian Dollar slipped slightly but remained near Monday’s 16-month high of $0.6941.