The US dollar held steady on Tuesday ahead of expectations of a Fed rate cut this week, while the Japanese yen strengthened after US Treasury Secretary Scott Bessent urged the Bank of Japan to implement "firm" monetary policy. The statement was interpreted as an encouragement for a rate hike in Japan.
The yen strengthened 0.66% to 151.88 per dollar ahead of the BOJ meeting, with investors waiting for any indication of the timing of the next rate hike. Meanwhile, Trump met with Japanese Prime Minister Sanae Takaichi in Tokyo and signed agreements on trade and rare earths.
Hopes for progress in US-China trade talks remained, although investors were wary that an actual deal may not be comprehensive. Trump and Xi are scheduled to meet in South Korea on Thursday.
The euro rose to a one-week high of $1.166, while the US dollar index fell to 98.67. Markets are awaiting the Fed meeting where rates are expected to be cut by another 25 basis points, as well as any signals on the end of quantitative tightening.
In Europe, the ECB is expected to keep rates unchanged, while the Australian and New Zealand dollars strengthened amid increased risk appetite.
