Dollar Slips on Yen Intervention Jitters While Gold Advances

The US dollar weakened against most major currencies after speculation that Washington could become directly involved in supporting Japan’s efforts to influence foreign-exchange markets dented confidence in the greenback. At the same time, demand for safe-haven assets pushed gold above the $5,000 mark for the first time, while US equity futures moved lower.

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The Dollar Spot Index slid to its lowest level since September following a rate check conducted Friday by the Federal Reserve Bank of New York. That move sparked market chatter that the US may help Japan intervene to curb the dollar’s strength against the yen. In response, Japan’s currency surged as much as 1.2% versus the dollar, marking one of its sharpest daily moves in recent weeks.

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The softer dollar provided a tailwind for Asian currencies more broadly. The Malaysian ringgit climbed to its strongest level since 2018, while South Korea’s won rose to its highest point in roughly three weeks. Singapore’s dollar also advanced, touching levels last seen in 2014 as investors rotated away from the greenback.

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Foreign-exchange volatility picked up after Japan’s top currency official, Atsushi Mimura, said authorities in Tokyo would act in close coordination with counterparts in Washington. His remarks followed earlier comments from Prime Minister Sanae Takaichi, who warned markets that the government stands ready to step in if currency moves become excessive.

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“The key takeaway here is the signal of policy coordination,” said Daniel Baeza, senior vice president at Frontclear. He added that if investors interpret this cooperation as an acceptance of looser global dollar conditions particularly if paired with a more dovish Federal Reserve response it could reinforce near-term downside pressure on the US currency.

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Traders increasingly viewed the New York Fed’s actions as a sign that US officials may be preparing to support Japanese authorities in direct currency-market intervention aimed at strengthening the yen. The dollar suffered its steepest weekly decline since May, weighed down by erratic US policy signals, renewed tariff friction between the US and Europe, and growing concerns over political interference with the Federal Reserve’s independence.

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Investor unease was further amplified over the weekend by rising fears of another US government shutdown. President Donald Trump also reignited trade tensions by threatening to impose tariffs of up to 100% on imports from Canada, adding another layer of uncertainty for markets already grappling with geopolitical and policy risks.

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Attention is once again shifting toward the dollar-yen relationship following a sharp rise in Japanese government bond yields last week, a move that rattled global fixed-income markets. The coming days are shaping up to be critical, with the Federal Reserve set to announce its latest policy decision and major US companies such as Microsoft Corp. and Tesla Inc. scheduled to report earnings.

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For currency strategists, the possibility of US support for a stronger yen has reopened debate around coordinated foreign-exchange intervention designed to push the dollar lower against the currencies of key trading partners. Some investors argue that a weaker dollar would help US exporters remain competitive with rivals in economies like China and Japan.

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“If the New York Fed decides to actively participate, that would significantly accelerate the yen’s rally,” said Gareth Berry, a strategist at Macquarie Bank Ltd. in Singapore. He noted that the impact would extend beyond symbolism, pointing out that while Japan holds substantial dollar reserves to sell, the US central bank effectively has unlimited capacity. Such a move would also likely be interpreted as a broader signal that the Trump administration favors a weaker dollar.

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Meanwhile, political risks at home continued to build. Concerns about a potential US government shutdown intensified after Senate Democratic leader Chuck Schumer pledged to block a sweeping spending bill unless Republicans agree to remove funding for the Department of Homeland Security. That standoff has raised the likelihood of at least a partial shutdown if lawmakers fail to reach a compromise.

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Geopolitical tensions are also firmly on investors’ radar. Over the weekend, Trump ordered additional naval assets to be deployed to the Middle East, fueling speculation that he may follow through on earlier threats to target Iran’s senior leadership. The move comes amid reports of a violent crackdown on widespread protests across the country, adding to global risk aversion.

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Taken together, the combination of currency intervention fears, rising geopolitical stress, and domestic political uncertainty has left investors reassessing exposure to the US dollar. With gold hitting record highs and risk assets under pressure, markets appear braced for continued volatility as central banks and governments navigate an increasingly fragile global backdrop.