Fed Meeting- Safe-Haven Currencies Drop as Dollar Rises

Fed Meeting- Markets Focus on Fed, China Deal Hopes Rise

Fed Meeting– The U.S. dollar strengthened against key safe-haven currencies on Tuesday, reflecting cautious investor sentiment ahead of the Federal Reserve’s policy announcement and ongoing global trade developments. The greenback climbed 0.6% versus the Japanese yen and gained slightly against the Swiss franc, while holding steady near recent levels against the euro.

Treasury demand remains resilient

Investor appetite for U.S. government bonds remained strong, as seen in a successful auction of the 10-year Treasury note. The continued interest in Treasuries comes despite recent concerns tied to escalating trade tensions, which have rattled confidence in U.S. assets.

Dollar volatility follows tariff swings

The dollar has experienced sharp movements in recent weeks. It dipped after the U.S. announced new tariffs last month but rebounded on April 22 following comments by Treasury Secretary Scott Bessent. He hinted at a possible de-escalation in the U.S.-China trade dispute, a statement that buoyed markets.

High-level trade talks on the horizon

Bessent and U.S. chief trade negotiator Jamieson Greer are scheduled to meet with China’s top economic official He Lifeng this weekend in Switzerland. Many see the meeting as a key opportunity to restart negotiations and reduce friction that has weighed on the global economy.

The unknowability of the inflationary implication of tariffs, and the longer-term effect from a rise in inflation expectations compel the FOMC to dissuade traders from assuming that aggressive rate cuts are ahead.

Yen and franc lose ground

Japanese yen weakens after holiday

The dollar’s rebound against the yen ended a three-day losing streak, aided by the reopening of Japanese markets after a two-day break. Bessent’s upcoming testimony before the U.S. House on the “State of the International Financial System” is also in focus for currency traders.

He’ll argue that U.S. bond markets are functioning in an orderly manner and probably repeat the mantra that Washington retains a strong dollar policy.

It will be interesting, however, if he’s quizzed on whether currency deals are part of the trade negotiations currently underway with 17 other trading partners.

Swiss franc under pressure

The U.S. dollar edged up by 0.15% against the Swiss franc on Tuesday, trading at 0.8233. This slight rebound followed a notable dip just a day earlier, when the greenback dropped to 0.8032—its weakest level against the franc since January 2015. The recent volatility in the USD/CHF pair reflects a broader shift in investor sentiment amid global economic uncertainty and growing concerns about inflation dynamics.

Commenting on the situation, Swiss National Bank (SNB) Chairman Martin Schlegel emphasized the central bank’s readiness to act decisively if inflationary pressures weaken further. “We are fully prepared to intervene in the foreign exchange markets when necessary,” Schlegel said during a press briefing. He also reiterated that the SNB would not hesitate to cut interest rates below zero again if needed, in order to maintain price stability—one of the bank’s core policy objectives.

The SNB’s willingness to deploy aggressive monetary tools underscores its commitment to preventing deflation and supporting the Swiss economy during times of global financial stress. Analysts noted that Switzerland’s traditionally strong currency, often considered a safe haven during market turbulence, has come under renewed scrutiny as central banks worldwide reassess their rate policies amid persistent inflation and geopolitical risks.

Euro holds steady amid political shifts

The euro remained flat at $1.1366 following a 0.48% gain the previous day. Markets appeared to take in stride the news that Friedrich Merz was elected as Germany’s chancellor in a second round of voting, after initially failing to secure enough parliamentary support.

Broader market developments

European defense ties grow stronger

France and Germany have agreed to form a joint defense security council to coordinate future investment and policy efforts—part of a broader initiative to boost EU defense capabilities amid growing global instability.

Asian currencies rally on Taiwan dollar surge

Elsewhere in the currency markets, a rally in the Taiwan dollar earlier this week spilled over into other Asian currencies, including the Singapore dollar and the South Korean won, indicating regional optimism and speculative interest.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Cryptocurrencies and stocks, particularly in micro-cap companies, are subject to significant volatility and risk. Please conduct thorough research before making any investment decisions.