The U.S. dollar fell sharply against major currencies, while the Japanese yen jumped to a two-month high amid speculation of possible joint currency intervention by the U.S. and Japan.
Investors scaled back dollar holdings ahead of a Federal Reserve meeting and uncertainty over the announcement of a new Fed chair by the Trump administration.
The big picture: Fears of another U.S. government shutdown also pressured the dollar, with a funding deadline looming on January 30.
- The dollar slid 1% to 154.15 yen, marking a nearly 3% drop over two sessions – the steepest decline since April 2025.
- Japanese Prime Minister Sanae Takaichi said her government would take “necessary steps” against speculative moves, increasing expectations of official action.
- On Friday, the New York Federal Reserve’s rate checks with dealers suggested a precursor to intervention, fueling a rush to exit short yen positions.
Go deeper: The yen is under pressure due to Japan’s extensive government debt and rising market interest rates; PM Takaichi countered concerns by promising tax cuts ahead of a February 8 snap election.
- Despite a spike in the yen’s rate on Friday, Bank of Japan data indicated no official Japanese intervention at that time.
- The dollar’s weakness boosted the euro, British pound, and Australian dollar to multi-month highs.
- The euro rose 0.4% to $1.18585, sterling climbed 0.3% to $1.3691, and the Australian dollar advanced 0.5% to $0.6931.
What we’re watching: President Trump is expected to soon announce his pick for the next Federal Reserve chair, with Rick Rieder the betting favorite.
- The Federal Reserve is set to decide interest rates on Wednesday, with no immediate changes expected but hints at future rate cuts likely.
