Dollar languishes ahead of Fed meeting, Asian currencies calmer

The dollar steadied on Wednesday before a Federal Reserve meeting to determine policy for an uncertain economy and as major investors in Asia continued cashing out of U.S. assets, Reuters reported.

News that the United States and China are due to talk on Saturday eased concerns about a trade war that has shaken investor confidence in the dollar and U.S. markets. Fed Chair Jerome Powell was expected to say more data is needed before deciding the U.S. central bank’s next move.

There appeared to be some letup in the selling of dollars since last week, which has been driven by investors globally, particularly in lower-yielding emerging markets, swapping out of the currency or bringing money home.

The greenback got a “micro bounce” on the impending trade talks, but broad pessimism about the U.S. economy and the dollar remain intact, according to IG analyst Tony Sycamore.

“I don’t think the theme of U.S. dollar weakness is going to change,” Sycamore said. “There’s also a lot of uncertainty from offshore investors as to whether they want to be overexposed or overweight U.S. equities.”

Earlier this week, a record rally in the Taiwan dollar spread to other currencies in Asia, such as the Singapore dollar and the South Korean won.

Taiwan’s currency has surged against the U.S. currency since U.S. President Donald Trump’s April 2 announcement of sweeping tariffs on trade partners. It was 0.7% weaker on Wednesday.

The won reached a six-month high at Wednesday’s opening, but subsequently fell 1.5%. The yuan weakened as China announced a long-awaited rate cut.

The People’s Bank of China governor said on Wednesday the central bank would cut the amount of cash that banks must hold as reserves, the first reduction in 2025, to prop up the world’s second biggest economy amid the simmering trade war.

The dollar index was little changed after slipping 0.2% on Tuesday, its third-straight decline. The euro edged 0.2% lower to $1.1338, giving up some gains following Friedrich Merz’s election as chancellor of Germany.

The Fed is widely expected to leave benchmark interest rates unchanged on Wednesday. Traders are betting the Fed will resume its easing cycle in July, but some economists reckon high inflation will prevent any rate cuts at all this year.

U.S. stock futures turned positive after Washington officials said Treasury Secretary Scott Bessent and chief trade negotiator Jamieson Greer will meet China’s top economic official in Switzerland on Saturday. Trump indicated on Sunday that some trade deals would be announced this week.