The U.S. dollar remained under pressure on Wednesday as traders awaited the Federal Reserve’s upcoming decision, which is expected to shed light on the central bank’s stance amid growing economic uncertainty.
Global investors continued to reduce exposure to U.S. assets, especially in Asia, where capital has been flowing back into domestic markets. A key development helping to stabilize sentiment came as the U.S. and China announced plans to resume trade negotiations on Saturday, easing fears of escalating trade tensions.
The dollar has been on a downward trend since last week, as investors, particularly in lower-yielding emerging markets, pulled money out of dollar assets. The Taiwan dollar led the regional rally, appreciating more than 10% against the U.S. dollar since early April. However, it dipped by 0.65% on Wednesday.
The Korean won hit a six-month high at the start of the session before pulling back. Meanwhile, the Chinese yuan softened after the People’s Bank of China announced the first reserve requirement ratio (RRR) cut of 2025 to support a slowing economy.
The dollar index slipped 0.2% on Tuesday, marking its third straight decline. The euro also edged 0.2% lower to $1.1340, partially giving up gains following Friedrich Merz’s election as Germany’s new chancellor.
Although the Federal Reserve is widely expected to hold interest rates steady this week, some traders are betting that rate cuts could resume by July. However, persistent inflation could still delay any policy easing.
In the meantime, U.S. officials including Treasury Secretary Scott Bessent and top trade negotiator Jamieson Greer are scheduled to meet with China’s senior economic leadership in Switzerland this weekend. President Donald Trump suggested that trade deals could be announced in the coming days, boosting market sentiment and lifting U.S. stock futures.
As traders await Fed Chair Jerome Powell’s comments, gold prices continued their upward momentum. The metal is now up 31% this year, driven by safe-haven demand and ongoing weakness in the U.S. dollar.
With Fed policy, global trade developments, and inflation trends all in flux, markets are expected to remain sensitive in the short term. Currency traders will be closely watching for any signs of direction from central banks and geopolitical shifts.
