The U.S. dollar held steady Wednesday ahead of a crucial Federal Reserve policy meeting, with investors cautious amid an uncertain economic outlook and renewed capital outflows from Asian markets. News of upcoming U.S.-China trade talks, set for Saturday in Switzerland, helped ease fears of an escalating trade war. Treasury Secretary Scott Bessent and trade chief Jamieson Greer will meet China’s top economic official, following hints from President Trump about potential trade deals this week.
Fed Chair Jerome Powell is expected to signal that more economic data is needed before making any policy moves. While the Fed is anticipated to keep rates unchanged, markets are split on whether cuts will resume by July or be delayed due to persistent inflation concerns.
Currency markets showed signs of stabilization following extreme volatility. Taiwan’s dollar, which had surged over 10% after Trump’s tariff announcement on April 2, weakened slightly by 0.65%. The Korean won touched a six-month high before retreating, while the Chinese yuan softened after China’s central bank announced its first reserve requirement ratio (RRR) cut of 2025 to support growth.
The U.S. dollar index remained flat after three consecutive daily losses, while the euro dipped 0.2% to $1.1340 after Friedrich Merz’s election as Germany’s chancellor. Meanwhile, the Japanese yen weakened 0.4% following a holiday, and the Hong Kong dollar hovered near the strong end of its trading band.
Analysts at Deutsche Bank warned that sharp currency shifts, like those in Taiwan, could ripple across markets with large unhedged dollar positions. Japan, with $2 trillion invested in U.S. assets via pension and insurance firms, remains highly exposed. A stronger yen could erode returns, pressuring Japan’s institutional investors.


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