LONDON – The U.S. dollar edged higher on Tuesday but struggled to gain traction, while traders remained wary of the possibility of coordinated currency intervention by U.S. and Japanese authorities and kept an eye on the Federal Reserve’s interest rate decision on Wednesday.
Much of the foreign exchange market’s attention these days has been on the yen, which has risen as much as 3% in the past two sessions on talk of interest rate checks by the United States and Japan, often seen as a harbinger of official intervention. This has kept the yen stable at around 153-154 yen to the dollar, some distance from Friday’s low of 159.23 yen. The dollar last traded at $154.75, up about 0.4% against the yen.
“The fact that it’s coming from the U.S. suggests that multiple parties are probably prepared to intervene, or it poses a risk to the market. This is different from what we’ve seen in the past,” said Parisha Saimbi, emerging Asia currency and local markets strategist at BNP Paribas. “And I think that’s part of the reason why we’ve actually seen a broader dollar move, not just the move we’ve seen in the dollar/yen.” There was no confirmation of interest rate reviews by Japanese or U.S. officials, but people told Reuters the New York Fed surveyed dealers on the dollar/yen rate on Friday. Meanwhile, senior Japanese officials said Monday they were working closely with the United States. About foreign exchange. Despite concerns about Japan’s fiscal health, investors are hesitant to weaken the yen due to the possibility of intervention. Analysts also said there are high hurdles for coordinated intervention. Bank of Japan money market data showed Friday’s sharp rise in the yen versus the dollar was unlikely to be due to Japanese intervention.
The dollar is under intense pressure The dollar is under intense pressure from a variety of factors, including the U.S. government’s desire for a weaker currency and uncertainty over U.S. President Donald Trump’s policy decisions. Nick Reese, head of macro research at Monex Securities, said this could come into play again after the Fed’s interest rate decision on Wednesday. “The Fed is scheduled to meet tomorrow, and markets will remain quite cautious ahead of that event. The big risk, as we see it, is not in the rate decision. We’re pretty confident the Fed will keep rates unchanged, but Mr. Trump won’t like that.” Reese said President Trump could announce a candidate to replace Chairman Jerome Powell right after the rate decision, especially if the president doesn’t support the central bank’s decision. “We think this will significantly increase the volatility of the dollar,” he said. The two-day Fed policy meeting, which begins Tuesday, will also focus on the Trump administration’s criminal investigation into Powell and developments aimed at removing Fed Director Lisa Cook. The dollar rose against a basket of currencies for the first time in four days, rising 0.2% to $97.27. It has fallen about 1% since the start of the year, hitting a four-month low of 96.808 on Monday. The euro fell 0.2% to $1.1855, not far from Monday’s four-month high of $1.19075. The pound fell 0.07% to $1.3668, hovering around the previous session’s four-month high of $1.37125.
The Australian dollar fell slightly but remained close to Monday’s 16-month high of US$0.6941.
