The US dollar fell on Tuesday as traders prepared for a series of central bank meetings expected to deliver an interest rate cut by the Federal Reserve, while investors also focused on President Donald Trump’s Asia tour amid hopes for a trade deal with China.

The Japanese yen rose more than 0.6% to 151.855 per dollar ahead of this week’s Bank of Japan meeting, where policymakers are expected to keep rates unchanged. Markets, however, will be watching closely for signals on the timing of the next rate hike.

Yen gains were supported by comments from US Treasury Secretary Scott Bessent, who called for “disciplined monetary policy” after meeting his Japanese counterpart, Satsuki Katayama — the latest in a series of remarks criticizing the Bank of Japan’s slow pace of tightening.

In Tokyo, Trump met Japan’s new Prime Minister Sanae Takaichi, praising her pledge to accelerate military capacity-building and signing new agreements on trade and rare-earth minerals.

Hopes for a Trade Deal with China

Although early signs of easing tensions between the world’s two largest economies spurred a wave of risk-taking on Monday, investors remain cautious that any potential deal may fall short of expectations.

The world’s attention now turns to Thursday’s meeting between Trump and Chinese President Xi Jinping in South Korea.

Speaking aboard Air Force One before landing in Tokyo, Trump said, “I have great respect for President Xi, and I believe we’ll come out with an agreement.”

Chinese officials, meanwhile, have maintained a reserved tone and offered no clear indication of potential outcomes from the talks.

Vasu Menon, Executive Director of Investment Strategy at OCBC Bank, said a “perfect solution or even a comprehensive settlement” is unlikely, suggesting unresolved issues could be postponed.

“When two global economic powers led by strong leaders try to reach an agreement, the process is never smooth,” Menon added. Still, he noted that any tangible progress could be enough to reassure markets and sustain the stock rally.

Rate Cut Expectations Pressure the Dollar

The dollar’s decline was also driven by expectations of a 25-basis-point rate cut by the Federal Reserve. The euro rose to a one-week high at 1.1668 dollars, while the British pound gained 0.25% to 1.3368 dollars.

The US Dollar Index, which measures the greenback’s performance against six major peers, slipped 0.19% to 98.58 after a 0.15% drop in the previous session.

Markets Await the Fed Meeting

While a rate cut is almost certain, investors will focus on whether the Fed signals an end to its quantitative tightening program. Markets will also watch Chair Jerome Powell’s comments for clues about future cuts, especially amid the ongoing US government shutdown that continues to delay economic data releases.

Traders also expect another rate reduction in December.

David Merkel, Chief Economist at Goldman Sachs, said: “We don’t expect explicit guidance on the December meeting, but Powell is likely to reference the September projections that pointed to a third rate cut by then.”

The Fed lowered rates by 25 basis points last month.

Other Central Banks Stay Cautious

In Europe, the European Central Bank is expected to leave interest rates unchanged again on Thursday, while traders remain divided on whether monetary easing could resume next year.

In the Asia-Pacific region, the Australian dollar — often viewed as a proxy for risk appetite — rose 0.11% to 0.6563 US dollars, a two-week high, while the New Zealand dollar edged slightly higher to 0.5782.

Silver prices slid to a five-week low in European trading on Tuesday, deepening losses for the third consecutive session as heavy selling pressure hit safe-haven assets amid rising optimism over trade talks and improving risk appetite across global markets.

Later today, the US Federal Reserve begins its key two-day monetary policy meeting, with decisions due Wednesday. Market expectations remain steady for a 25-basis-point rate cut — the second consecutive reduction in US interest rates.

Price Overview

• Silver prices fell 2.9% to $45.56 an ounce, the lowest since September 26, down from an opening level of $46.93, after touching a session high of $47.23.

• On Monday, silver lost about 3.5%, marking its second straight daily decline.

Trade Optimism

US President Donald Trump said he expects to reach a “fair trade deal” with Chinese President Xi Jinping when the two meet Thursday in South Korea, downplaying the risk of confrontation over the Taiwan issue.

On Sunday, senior economic officials from the US and China held important discussions on a new trade framework that is expected to be presented to Trump and Xi for final approval in the coming days.

Trump also announced a series of trade and raw-material agreements in Malaysia with four Southeast Asian countries during the first stop of his five-day Asia tour.

These positive developments quickly lifted global equity markets, pushing major Wall Street indexes to record highs, led by strong gains in technology and basic materials stocks.

Federal Reserve

The Federal Reserve’s policy meeting begins later today, with a decision expected Wednesday. Markets broadly anticipate a 25-basis-point rate cut — the second consecutive reduction in the benchmark US interest rate.

The post-meeting statement and remarks by Fed Chair Jerome Powell are expected to provide clear guidance on whether further rate cuts could follow later this year.

US Interest Rates

According to CME’s FedWatch Tool, markets are currently pricing in a 97% probability of a 25-basis-point rate cut at this week’s meeting, with only a 3% chance of no change.

Gold prices fell in European trading on Tuesday, deepening losses for the third consecutive session and hitting a three-week low, as open selling positions accelerated and investors moved away from safe-haven assets amid easing trade tensions between the United States and China.

Later today, the Federal Reserve begins its highly anticipated monetary policy meeting, with decisions due Wednesday. Markets broadly expect a 25-basis-point rate cut — the second consecutive reduction in US interest rates.

Price Overview

• Gold prices fell more than 2.0% to $3,901.35 per ounce, the lowest since October 6, down from the opening level of $3,981.50, after hitting an intraday high of $4,019.80.

• On Monday, gold lost 3.2%, its second daily decline in a row, as it fell below the key $4,000-per-ounce level amid optimism surrounding global trade talks.

Trade Developments

On Sunday, senior economic officials from the United States and China held significant discussions to outline a new trade framework expected to be presented to US President Donald Trump and Chinese President Xi Jinping for final approval in the coming days.

Trump and Xi are scheduled to meet Thursday in South Korea — their first encounter of Trump’s second term — in what analysts expect to be a pivotal moment for US–China relations, particularly regarding global trade and geopolitical tensions in Asia.

Trump expressed confidence that a deal could be reached and announced a series of trade and raw-material agreements in Malaysia with four Southeast Asian countries during the first leg of his five-day Asia tour.

Federal Reserve

The Federal Reserve’s policy meeting begins later today, with a decision due Wednesday. Markets expect a 25-basis-point rate cut, marking the second consecutive reduction in benchmark US interest rates.

The post-meeting statement and comments from Fed Chair Jerome Powell are expected to provide clear guidance on whether additional rate cuts are likely before year-end.

US Interest Rates

According to CME’s FedWatch Tool, markets are currently pricing in a 97% probability of a 25-basis-point rate cut at this week’s meeting, with only a 3% chance of no change.

Gold Outlook

• Tim Waterer, chief market analyst at KCM Trade, said: “Buyers who have been watching from the sidelines are beginning to take positions at these price levels. We’re also seeing some softness in the dollar, which gives gold a chance to rebound.”

• Waterer added: “If Trump and Xi hold a productive trade meeting this week, gold could stage a countertrend rise — though that might be offset if the Fed adopts a cautious tone alongside the expected rate cut.”

SPDR Fund

Holdings in the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell by 8.01 metric tons on Monday — the second consecutive daily decline — bringing the total to 1,038.92 metric tons, the lowest since October 16.

The euro rose in European trading on Tuesday against a basket of major currencies, extending its gains for the fifth consecutive session against the US dollar and reaching a one-week high, as market sentiment improved amid positive developments in US–China trade negotiations.

These gains were also supported by a weaker US dollar ahead of Wednesday’s widely expected Federal Reserve rate cut, with strong odds pointing to another reduction before the end of the year.

Renewed inflationary pressures in the eurozone have diminished expectations for the European Central Bank to cut interest rates during its meeting this week. The details of that meeting are expected to provide stronger guidance on the path of European rates for the remainder of this year and into 2026.

Price Overview

• EUR/USD rose 0.2% to 1.1667, its highest level in a week, from an opening price of 1.1644, after touching a low of 1.1644.

• The euro closed Monday up 0.15% against the dollar, marking its fourth straight daily gain amid improving risk appetite across markets.

Trade Developments

Attention is now turning to the upcoming meeting between US President Donald Trump and Chinese President Xi Jinping in South Korea on Thursday. Speaking to reporters aboard Air Force One before landing in Tokyo, Trump said, “I have great respect for President Xi, and I think we’ll reach an agreement.”

Analysts noted that signs of progress between the two countries and the possibility of the US reducing tariffs on China were enough to lift investor sentiment and boost demand for risk assets.

US Dollar

The US Dollar Index fell more than 0.2% on Tuesday, extending losses for the second straight session and reflecting continued weakness in the greenback against major and minor peers.

The dollar’s decline comes ahead of Wednesday’s expected 25-basis-point rate cut by the Federal Reserve — its second consecutive reduction — with markets also anticipating signals of another cut before year-end.

European Central Bank

• The European Central Bank meets on Wednesday and Thursday to assess the appropriate monetary stance in light of recent economic developments in the euro area.

• The bank is widely expected to keep interest rates unchanged at 2.15%, their lowest level since October 2022, marking the third consecutive meeting without a policy adjustment.

• Markets continue to look for clearer guidance on when the ECB might resume its rate-cut cycle before the end of the year.