Anna 
The U.S. dollar retreated on Monday ahead of the Federal Reserve meeting, while the Japanese yen soared amid speculation of intervention by Japanese authorities to halt its steep decline.
The Dollar Index, which measures the dollar against a basket of currencies, traded 0.2% lower at 105.630, pulling back from recent highs reached last week.
Market sentiment on the dollar has remained relatively strong in April, with traders scaling back expectations of imminent rate cuts by the Fed after Friday’s PCE price index data signaled hotter-than-expected inflation for March. Analysts from ING noted that the strong jobs report from last month is likely to prompt a cautious tone from Fed Chair Jerome Powell regarding rate cuts.
Attention is now focused on the upcoming Fed meeting concluding on Wednesday, where the central bank is expected to maintain steady rates and possibly adopt a more hawkish outlook given the persistent inflation pressures in the U.S.
The foreign exchange market saw significant movement in Asia on Monday, particularly with USD/JPY plummeting 1.8% to 155.56 after touching highs near 160. Japanese authorities declined to comment on intervention, but there are indications of market intervention to stabilize the yen, which has reached 34-year lows against the dollar despite the Bank of Japan’s recent exit from negative interest rates.
Meanwhile, in Europe, EUR/USD rose 0.3% to 1.0722 amid a weaker dollar tone. Traders analyzed European inflation data, including Spain’s consumer price rise and German states’ April consumer figures, which remained above the European Central Bank’s target.
GBP/USD also gained 0.3% to 1.2528, benefiting from dollar weakness following recent policy comments from the Bank of England and U.S. rate repricing.
Elsewhere, USD/CNY traded flat at 7.2462, while AUD/USD rose 0.4% to 0.6558 on speculation of increased interest rate hikes by the Reserve Bank of Australia following a stronger-than-expected first-quarter inflation reading.
Overall, currency markets are poised for further volatility amid central bank decisions, economic data releases, and geopolitical developments influencing global currency dynamics.
