The U.S. dollar edged higher on Tuesday but struggled to gain momentum as investors focused on Wednesday’s Federal Reserve interest rate decision and stayed alert to possible coordinated currency intervention by U.S. and Japanese authorities.
Recent moves in the foreign exchange market have centred on the Japanese yen, which has rallied by as much as 3% over the past two sessions amid speculation that the United States and Japan have conducted so-called “rate checks,” a move often seen as a precursor to official intervention.
That rally helped steady the yen around 153 to 154 per dollar, well above Friday’s low of 159.23. By Tuesday, the yen traded at 154.75 per dollar, with the greenback gaining about 0.4%.
Intervention Talk Lifts Yen, Weighs on Dollar
Market participants say the possibility of joint action has made investors cautious about pushing the yen lower.
“The fact that it’s coming from the U.S. suggests there may be multiple parties prepared to intervene, which is different from what we’ve seen in the past,” said Parisha Saimbi, EM Asia FX and local markets strategist at BNP Paribas.
“That’s part of why we didn’t just see a move in dollar/yen, but a broader dollar move.”
Although officials in Tokyo and Washington have not confirmed any rate checks, a source familiar with the matter told Reuters that the New York Federal Reserve checked dollar/yen rates with dealers on Friday.
Japanese authorities also said on Monday that they remain in close coordination with the United States on foreign exchange matters.
Analysts, however, noted that the bar for coordinated intervention remains high. Bank of Japan money market data indicated that Friday’s sharp spike in the yen was unlikely to have resulted from Japanese intervention.
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Beyond intervention concerns, the dollar remains under pressure from multiple factors, including Washington’s preference for a weaker currency and uncertainty surrounding U.S. President Donald Trump’s policy direction.
These issues could resurface following the Federal Reserve’s interest rate decision on Wednesday, according to Nick Rees, head of macro research at Monex.
“We have a Fed meeting tomorrow, and we think the market will stay pretty tentative ahead of that,” Rees said.
“The big risk isn’t the rate decision we expect the Fed to hold rates unchanged, but Trump is not going to like that.”
Rees added that Trump could soon announce his preferred successor to Fed Chair Jerome Powell, particularly if he opposes the central bank’s decision.
“That would inject significant dollar volatility,” he said.
The market is also watching developments around the Trump administration’s criminal investigation of Powell and efforts to remove Fed Governor Lisa Cook, as the Fed’s two-day policy meeting began on Tuesday.
Mixed Performance Across Major Currencies
The dollar rose for the first time in four days against a basket of major currencies, gaining 0.2% to 97.27. Despite the uptick, the greenback has fallen about 1% since the start of the year and hit a four-month low of 96.808 on Monday.
The euro slipped 0.2% to $1.1855, remaining close to Monday’s four-month high of $1.19075.
Sterling eased 0.07% to $1.3668, still hovering near its previous session peak of $1.37125.
The Australian dollar edged slightly lower but stayed near Monday’s 16-month high of $0.6941.
Esther Ososanya is an investigative journalist with Pinnacle Daily, reporting across health, business, environment, metro, Fct and crime. Known for her bold, empathetic storytelling, she uncovers hidden truths, challenges broken systems, and gives voice to overlooked Nigerians. Her work drives national conversations and demands accountability one powerful story at a time.
