The U.S. dollar remained steady on Wednesday ahead of a key policy meeting by the Federal Reserve amid economic uncertainty and continued asset sell-offs by major Asian investors.
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News of planned talks between the United States and China scheduled for Saturday helped ease concerns over the ongoing trade war, which had shaken investor confidence in the dollar and U.S. markets. Fed Chair Jerome Powell is expected to signal that more data is needed before deciding on the central bank’s next move regarding interest rates.
The dollar’s selling momentum appears to have eased since last week, after global investors, particularly in emerging markets, began pulling funds or repatriating capital.
A record surge in the value of the Taiwanese dollar boosted several Asian currencies this week, including those of Singapore and South Korea.
The Taiwanese dollar has gained over 10% against the U.S. dollar since President Donald Trump’s April 2 announcement of sweeping tariffs on trading partners. However, it slipped 0.7% on Wednesday.
The South Korean won touched a six-month high at the start of trading on Wednesday before retreating by 1.5%.
The Chinese yuan weakened following a long-anticipated interest rate cut by China. On Wednesday, the Governor of the People’s Bank of China announced a reduction in the reserve requirement ratio (RRR) for banks—the first such move in 2025—to support the world’s second-largest economy amid growing trade tensions.
The U.S. dollar index remained little changed after falling 0.2% on Tuesday, marking its third consecutive decline.
The euro dropped 0.2% to $1.1338, giving up some gains made following Friedrich Merz’s election as Germany’s new chancellor.
The Federal Reserve is widely expected to keep interest rates unchanged during Wednesday’s meeting. While markets are pricing in a potential return to monetary easing in July, some economists argue that persistent inflation may prevent any rate cuts this year.
U.S. stock futures rose after officials in Washington confirmed that Treasury Secretary Scott Bissent and chief trade negotiator Jamison Greer will meet with China’s top economic official in Switzerland on Saturday. President Trump also indicated on Sunday that some trade agreements could be announced this week.
Currency markets appeared calmer on Wednesday after the sharp rally in the Taiwanese dollar over the previous two days.
The Japanese yen weakened by 0.4%, ending a three-day winning streak as Japanese markets reopened after a two-day holiday.
George Saravelos, Global Head of FX Research at Deutsche Bank, wrote:
“We agree with market sentiment that the extreme forex volatility in Taiwan over the past few days serves as a warning shot.”
Source: Reuters
