Euro Pares Gains

Treasury Secretary Scott Bessent cooled speculation that the US may be considering intervening in the foreign-exchange market to sell the dollar for Japanese yen, and touted the long-standing “strong-dollar policy.”

The US is “absolutely not” intervening in the currency market to strengthen the yen, Bessent said in an interview on CNBC Wednesday. Asked whether the US might take such a step, he said that “we don’t comment other than to say we have a strong dollar policy.”

The yen tumbled after the remarks, and was down about about 0.9% at 153.51 as of 10:51 a.m. in New York. Speculation that the US might join Japan’s government in selling the dollar against the yen surged on Friday, after so-called rate checks into the currency pair by the Federal Reserve Bank of New York — which serves as the Treasury’s agent.

“The US always has a strong dollar policy — but a strong dollar policy means setting the right fundamentals,” Bessent said. “If we have sound policies, the money will flow in.”

Bessent spoke a day after President Donald Trump, for his part, indicated he was comfortable with the dollar’s recent decline. Asked whether he was worried about the depreciation, Trump told reporters, “‘No, I think it’s great.” He also said that “I think the value of the dollar — look at the business we’re doing. The dollar’s doing great.”

Trump’s comments helped send the Bloomberg Dollar Spot Index down 1.1% on Tuesday. After Bessent’s remarks, it was up 0.5% on the day.

“Bessent seems to be making an attempt to calm frayed market nerves,” said Sonja Marten, head of FX and monetary policy at DZ Bank. “While the US may welcome a softer dollar in general, a rapid depreciation of the currency is clearly not in their interest either.”

Trump Policies

Bessent also said that the shrinking US trade deficit should automatically lead to more dollar strength over time.

“I think that with President Trump, with the One Big Beautiful Bill, with our regulatory policies, we are making this the best place to come build your business, have tax certainty, regulatory certainty, energy certainty,” Bessent said.

Japan’s currency has been tumbling since October, sliding near its weakest level since 1986 earlier this month. The decline has come alongside investor concerns about Prime Minister Sanae Takaichi’s embrace of large-scale fiscal stimulus despite her nation’s elevated debt burden.

Japanese authorities have repeatedly warned that they’re prepared to take action to address the yen’s slide. Finance Minister Satsuki Katayama told reporters late Tuesday that her government will coordinate with the US on currency responses when necessary.

“We’ll continue to take appropriate responses on currency moves while closely coordinating with US authorities as needed, in line with our joint statement from September,” Katayama said.

The euro hovered just below the $1.20 level, its strongest since June 2021, buoyed by broad-based US dollar weakness ahead of the Federal Reserve’s closely watched policy announcement later today.

Investors will be looking for guidance on the timing of the next interest rate cut.

The dollar slipped to a near four-year low late Tuesday after President Trump said he was not concerned about the currency’s recent decline.

The greenback was already under pressure amid government shutdown worries, a weak consumer confidence reading, and ongoing policy uncertainty in Washington, including Trump’s renewed tariff threats and criticism of the Fed’s independence.

In Europe, ECB policymaker Martin Kocher warned that further euro strength could prompt the central bank to resume interest rate cuts.

Markets modestly increased expectations for a summer move, with the implied probability of a July cut rising to around 25% from roughly 15% earlier.

The euro surged above $1.18, reaching its strongest level since mid-September, as the US dollar extended last week’s losses amid investor caution ahead of the Federal Reserve’s monetary policy announcement on Wednesday.

While the Fed is widely expected to leave interest rates unchanged, markets are closely watching its forward guidance for clues on the timing of the next rate cut.

Adding to the uncertainty, expectations are growing that a more dovish candidate to succeed Fed Chair Jerome Powell could be announced as early as this week.

Meanwhile, investors remained alert to elevated geopolitical and trade tensions.

US President Donald Trump initially threatened several European countries with new tariffs as part of an effort linked to Greenland, before reversing course following the announcement of a framework agreement toward a future deal.

He also warned that the US could impose 100% tariffs on Canada if it were to conclude a trade agreement with China.

The dollar weakened against most major peers Monday as investors debated how potential US involvement in foreign-exchange intervention in Japan might worsen sentiment toward the world’s reserve currency.

The yen strengthened 1% in Asia trading against the greenback as speculation mounted that Japanese authorities could be preparing to intervene to boost their embattled currency, perhaps with the US government joining in. Bloomberg’s gauge of the US currency fell 0.4%, extending last week’s 1.6% decline.

For many dollar watchers, signs of US support to boost the yen re-opens the debate about potential co-ordinated currency intervention to guide the greenback lower against key trading partners. The thinking goes that such a pact would help American exporters compete with rivals such as China and Japan.

“If the New York Fed chooses to join in, then that would amplify the yen rally — and not just for symbolic reasons,” said Gareth Berry, strategist at Macquarie Group Ltd. “Japan has lots of dollars to sell, but the NY Fed has an infinite amount. It would also be interpreted as a sign that Trump wants a weaker dollar more generally.”

Chatter reignited Friday when traders reported that the Federal Reserve Bank of New York had contacted financial institutions to ask about the yen’s exchange rate. Wall Street saw those inquiries as potentially laying the ground for Japan to intervene with help from the US.

Co-ordinated intervention to prop up the yen is rare, with one occasion happening in 1998 and another being the Plaza Accord, a 1985 deal between the US, France, Japan, the UK and then West Germany to weaken the dollar.

Early last year, analysts debated the likelihood of a so-called Mar-a-Lago Accord, prompted by a research paper by Trump administration economist and now-Federal Reserve board member Stephen Miran on deliberately weakening the dollar.

“When the US Treasury starts making calls, it’s usually a sign this has moved past a normal FX story,” said Anthony Doyle, chief investment strategist at Pinnacle Investment Management. “The potential of coordinated action caps dollar-yen upside and makes the long dollar trade more fragile.”

Last week was the dollar’s worst since May after a week of unpredictable US policymaking rattled financial markets. President Donald Trump first brandished tariffs on Europe over his bid for Greenland, then abruptly dropped them. On Saturday, he threatened 100% tariffs on Canada if it reached a trade deal with China.

Risks around Federal Reserve independence and expectations that Chair Jerome Powell’s successor will be swayed by Trump to lower interest rates rapidly have also been weighing on the US currency. Bloomberg’s dollar gauge has fallen more than 9% since the beginning of last year.

The euro is heading toward the 1.19 zone with a likely path toward a four-year high as negative dollar momentum gathers pace.

Mark Cranfield, Markets Live strategist

Elsewhere on Monday, gold rose beyond $5,000 an ounce for the first time. Precious metals are in the midst of a record rally as heightened geopolitical risks have added impetus to the so-called debasement trade, whereby investors retreat from fiat currencies.

In Asia, a number of currencies rose to notable levels with the Singapore dollar at its highest since 2014 and the Malaysian ringgit at its strongest since 2018 against the greenback. Korea’s won jumped more than 1% — earlier this month US Treasury Secretary Scott Bessent offered rare verbal support to the currency.

To be sure, there’s still debate about whether the Trump administration actually favors a weaker dollar. Bessent said last year that the US continues to have a “strong dollar” policy and dismissed concerns about the greenback’s status as the world’s key currency.

But for Daniel Baeza, senior vice president at Frontclear, any sign of co-ordinated action could hit sentiment toward the greenback.

“The bigger signal is policy coordination,” he said. “If markets interpret coordination as a willingness to tolerate easier global dollar conditions, especially alongside a dovish Fed reaction function, that could reinforce short-term dollar downside.”

The rupee’s slide to a record low of 92 against the US dollar on January 23 is expected to push up the cost of imports such as crude oil, electronic goods, overseas education and foreign travel, raise inflationary pressures, while offering some relief to exporters.

The domestic currency has weakened by 202 paise, or over 2 per cent, so far this month. In 2025, it had declined 5 per cent amid sustained foreign fund outflows and a strong US dollar.

A depreciating rupee has an immediate impact on importers, who are required to pay more for the same quantity of goods. India meets around 85 per cent of its fuel requirements—such as petrol, diesel and jet fuel—through imports.

At the same time, exporters stand to benefit as they receive higher rupee earnings for every dollar earned.

Impact on spending

Imports: India’s import basket includes crude oil, coal, plastics, chemicals, electronic goods, edible oils, fertilisers, machinery, gold, pearls, precious and semi-precious stones, and iron and steel. Since importers need to purchase dollars to settle payments, a weaker rupee makes imports costlier. Apart from oil, prices of electronic items such as mobile phone components, select automobiles and appliances are also likely to rise.

Foreign education: A softer rupee increases the cost of studying abroad, as students need to pay more rupees for every dollar charged by overseas universities.

Foreign travel: Overseas travel becomes more expensive as travellers have to spend more rupees to buy dollars for expenses abroad.

Remittances: Non-resident Indians (NRIs) remitting money to India benefit from higher rupee conversions.

Exports: Exporters gain from the depreciation as they earn more rupees per dollar. However, exporters dependent on imported inputs may see the benefits partially offset.

In theory, sectors with lower import dependence, such as textiles, are likely to benefit more from a weaker rupee, while sectors with high import content, including electronics, may see limited gains.

According to the latest data, India’s imports rose 8.7 per cent to $63.55 billion in December 2025. The trade deficit stood at $25.04 billion during the month, compared with $24.53 billion in November 2025 and $22 billion in December 2024.

Crude oil imports, largely denominated in dollars, increased by around 6 per cent to $14.4 billion in December 2025. Silver imports surged nearly 80 per cent to $758 million, while gold imports declined 12 per cent to $4.13 billion.

Think tank GTRI has said that achieving long-term economic stability will require India to strike a balance between growth and inflation management, while reassessing its approach to rupee management and trade strategy.

The Federation of Indian Export Organisations (FIEO) noted that while a weaker rupee improves the global price competitiveness of Indian goods, sectors with high import dependence—such as gems and jewellery and electronics—may see the currency advantage diluted by higher input costs.

EURUSD increased to 1.18, the highest since December 2025.

Over the past 4 weeks, Euro US Dollar gained 0.04%, and in the last 12 months, it increased 12.25%.