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Major currencies edged higher against the U.S. dollar on Tuesday as the greenback softened in holiday-thinned trade, with investors turning cautious ahead of a dense slate of U.S. economic releases that could shape interest-rate expectations for 2026.
The dollar retreated with markets focused on U.S. third-quarter GDP and the personal consumption expenditures (PCE) price index due later in the day—two releases that will influence views on the Federal Reserve’s next steps. With year-end holidays dulling liquidity across Asia and Europe, price action was modest in most pairs, and many major currencies remained on track to finish 2025 with gains versus the dollar.
Yen Strengthens Sharply After Tokyo Signals Readiness to Act
The standout move came from Japan, where the yen rebounded after Finance Minister Satsuki Katayama issued a pointed warning that authorities are prepared to intervene if currency moves become excessive.
The USD/JPY pair fell 0.7%, pulling back from levels near its highs for the year, as Katayama said recent yen moves were being driven by speculation rather than fundamentals and pledged “appropriate action” against disorderly volatility.
The remarks were seen as Tokyo’s most decisive signal so far against renewed bets on yen weakness, triggering fears of government-led dollar selling. Japan has previously intervened in FX markets around the 155 to 160 range in USD/JPY, making that zone a key reference point for traders monitoring policy risk.
Dollar Slides Before GDP and PCE Inflation Test
The dollar index and dollar index futures both slipped more than 0.3% in European hours after a muted session on Monday. The pullback supported the euro and sterling:
- EUR/USD rose nearly 0.3% to 04:35 ET (09:35 GMT)
- GBP/USD added almost 0.4% over the same period
Markets are bracing for data that were delayed by the government shutdown in October and early November, raising questions about how “clean” the signal will be. GDP is expected to show the U.S. economy cooled from the prior quarter, while the PCE price index—the Fed’s preferred inflation gauge—is expected to indicate inflation remains relatively sticky.
Analysts caution that shutdown-related disruptions may limit how much weight investors place on October and November readings, with December data likely to be more influential for rate pricing into early 2026.
For now, markets continue to lean toward a Fed hold in January, even as longer-term expectations still point to lower rates over time—keeping the dollar sensitive to any surprise in growth or inflation later Tuesday.
