Dollar pressure mounts as traders game out US plans for yen

For many dollar watchers, signs of US support to boost the yen re-opens the debate about potential co-ordinated currency intervention to guide the greenback lower against key trading partners

• Dollar weakens as speculation grows over US-Japan coordinated FX intervention
• Yen rallies 1% amid talk of possible joint action to boost Japan's currency
• Gold exceeds $5,000/oz as investors abandon fiat currencies due to geopolitical risks

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The dollar weakened against most major peers Monday as investors debated how potential US involvement in foreign-exchange intervention in Japan might worsen sentiment toward the world’s reserve currency.

The yen strengthened 1% in Asia trading against the greenback as speculation mounted that Japanese authorities could be preparing to intervene to boost their embattled currency, perhaps with the US government joining in. Bloomberg’s gauge of the US currency fell 0.4%, extending last week’s 1.6% decline.

For many dollar watchers, signs of US support to boost the yen re-opens the debate about potential co-ordinated currency intervention to guide the greenback lower against key trading partners. The thinking goes that such a pact would help American exporters compete with rivals such as China and Japan.

“If the New York Fed chooses to join in, then that would amplify the yen rally — and not just for symbolic reasons,” said Gareth Berry, strategist at Macquarie Group Ltd. “Japan has lots of dollars to sell, but the NY Fed has an infinite amount. It would also be interpreted as a sign that Trump wants a weaker dollar more generally.”

Chatter reignited Friday when traders reported that the Federal Reserve Bank of New York had contacted financial institutions to ask about the yen’s exchange rate. Wall Street saw those inquiries as potentially laying the ground for Japan to intervene with help from the US.

Co-ordinated intervention to prop up the yen is rare, with one occasion happening in 1998 and another being the Plaza Accord, a 1985 deal between the US, France, Japan, the UK and then West Germany to weaken the dollar.

Early last year, analysts debated the likelihood of a so-called Mar-a-Lago Accord, prompted by a research paper by Trump administration economist and now-Federal Reserve board member Stephen Miran on deliberately weakening the dollar.

“When the US Treasury starts making calls, it’s usually a sign this has moved past a normal FX story,” said Anthony Doyle, chief investment strategist at Pinnacle Investment Management. “The potential of coordinated action caps dollar-yen upside and makes the long dollar trade more fragile.”

Last week was the dollar’s worst since May after a week of unpredictable US policymaking rattled financial markets. President Donald Trump first brandished tariffs on Europe over his bid for Greenland, then abruptly dropped them. On Saturday, he threatened 100% tariffs on Canada if it reached a trade deal with China.

Risks around Federal Reserve independence and expectations that Chair Jerome Powell’s successor will be swayed by Trump to lower interest rates rapidly have also been weighing on the US currency. Bloomberg’s dollar gauge has fallen more than 9% since the beginning of last year.

The euro is heading toward the 1.19 zone with a likely path toward a four-year high as negative dollar momentum gathers pace.

Mark Cranfield, Markets Live strategist

Elsewhere on Monday, gold rose beyond $5,000 an ounce for the first time. Precious metals are in the midst of a record rally as heightened geopolitical risks have added impetus to the so-called debasement trade, whereby investors retreat from fiat currencies.

In Asia, a number of currencies rose to notable levels with the Singapore dollar at its highest since 2014 and the Malaysian ringgit at its strongest since 2018 against the greenback. Korea’s won jumped more than 1% — earlier this month US Treasury Secretary Scott Bessent offered rare verbal support to the currency.

To be sure, there’s still debate about whether the Trump administration actually favors a weaker dollar. Bessent said last year that the US continues to have a “strong dollar” policy and dismissed concerns about the greenback’s status as the world’s key currency.

But for Daniel Baeza, senior vice president at Frontclear, any sign of co-ordinated action could hit sentiment toward the greenback.

“The bigger signal is policy coordination,” he said. “If markets interpret coordination as a willingness to tolerate easier global dollar conditions, especially alongside a dovish Fed reaction function, that could reinforce short-term dollar downside.”