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The U.S. dollar weakened further on Wednesday, hovering near a four-year low and extending sharp losses from the previous session, as investors focused on the Federal Reserve’s upcoming interest rate decision.
At 04:00 ET (09:00 GMT), the Dollar Index—which measures the greenback against a basket of six major currencies—edged 0.1% lower to 96.010, around levels last seen in February 2022, after dropping 0.5% on Tuesday.
Dollar under pressure amid policy uncertainty
The greenback is facing mounting pressure amid growing uncertainty over U.S. President Donald Trump’s policymaking and rising concerns about the Federal Reserve’s independence.
U.S. authorities conducted rate checks on USD/JPY late last week—a move often interpreted as a precursor to official intervention—leaving traders unsure whether a weaker dollar has now become an unofficial policy goal.
Trump brushed off concerns about the dollar’s recent weakness late Tuesday, adding fuel to speculation.
The Fed is widely expected to leave interest rates unchanged later in the session, shifting attention to Chair Jerome Powell’s remarks for clues on the timing of potential rate cuts later this year.
Powell’s term ends in May, and Trump said on Tuesday that he will soon announce his pick for the next Fed chair. Trump has repeatedly criticized Powell for being too slow to ease rates, raising concerns that a successor could weaken the central bank’s independence.
Euro retreats from multi-year highs
In Europe, EUR/USD slipped 0.4% to 1.1988, pulling back from levels last seen in June 2021 after the euro surged on broad dollar weakness.
The European Central Bank meets next week and is widely expected to keep rates on hold at 2% for a fifth consecutive meeting, with eurozone inflation restrained and the economy proving more resilient than expected.
Still, ECB policymakers may need to consider another rate cut if further euro strength starts to weigh on inflation, Austrian central bank governor Martin Kocher told the Financial Times on Wednesday.
GBP/USD fell 0.4% to 1.3794, easing after climbing to its strongest level since October 2021 in the prior session.
Yen remains on intervention watch
In Asia, USD/JPY rose 0.2% to 152.58 after sharp declines earlier in the week, as markets remain alert to the risk of intervention by Tokyo. Prime Minister Sanae Takaichi has warned against excessive yen volatility, while speculation persists over a coordinated U.S.-Japan move to stabilize the currency.
Elsewhere, USD/CNY slipped 0.1% to 6.9451, marking a 31-month low as the yuan continued to strengthen with support from Beijing.
AUD/USD dipped 0.1% to 0.7003, retreating from a near three-year high hit in the previous session. Australian inflation data released Wednesday came in hotter than expected for December and the fourth quarter, boosting bets that the Reserve Bank of Australia could hike rates next week.
