CaliToday (27/10/2025): The U.S. dollar climbed to a more than two-week high against the Japanese yen on Monday, as global markets settled in for a critical week packed with high-stakes trade negotiations in Asia and a pivotal U.S. Federal Reserve policy meeting.
The greenback's strength comes at the start of a whirlwind diplomatic tour for U.S. President Donald Trump, who arrives in Japan on Monday. He is scheduled to hold a crucial summit the following day with the nation's new prime minister, Sanae Takaichi, to shore up bilateral ties.
From there, the focus will shift to what could be the climax of the U.S.-China trade saga. President Trump is set to meet Chinese President Xi Jinping on Thursday on the sidelines of the APEC summit in Gyeongju, South Korea. The two leaders are expected to review and formally sign off on the framework of a trade deal that their top officials, led by U.S. Treasury Secretary Scott Bessent, successfully hashed out over the weekend in Kuala Lumpur.
Speaking from the ASEAN summit, Bessent delivered the news markets were desperate to hear: the U.S. has eliminated the possibility of imposing crippling 100% tariffs on Chinese imports that were scheduled for November 1. In a further major concession, Bessent said he expects China to delay the implementation of its rare earth minerals and magnets licensing regime—a key economic weapon—by a year for reconsideration.
The Fed Paradox: Why the Dollar is Firm
Even as trade tensions ease, the week's other main event is the U.S. Federal Reserve meeting. The Fed is widely expected to cut its benchmark interest rate by another quarter percentage point on Wednesday, from its current 4.00%-4.25% range, following tamer-than-expected inflation data on Friday.
Normally, the prospect of a rate cut would weaken a currency. However, the dollar is finding support in a classic market scenario: the cut is already "fully priced in."
"Looking ahead, we think that dollar firmness is likely to remain in the near term," said Mahjabeen Zaman, head of foreign exchange research at ANZ, on a podcast. "Fed cuts are fully priced in for October and December meetings. So if anything, any cautious communication from the Fed would likely be more supportive for the U.S. dollar."
With the rate move itself a foregone conclusion, market sensitivity will shift entirely to the forward-looking language from Fed Chair Jerome Powell. Any hint that the Fed may pause its easing cycle after this cut will be seen as hawkish and send the dollar higher.
This contrasts with the Bank of Japan, which meets on October 29-30. While most analysts expect the BOJ to keep its policy rate steady at 0.5%, the bank is reportedly beginning to debate whether conditions are ripe to resume rate hikes as tariff-induced recession fears ease.
Market Snapshot
The U.S. dollar strengthened 0.2% to 153.12 yen, its highest level since October 10. The dollar index (DXY), which measures the greenback against a basket of peers, was little changed at 98.94.
The yen's weakness was broad-based. The euro was steady against the dollar at $1.1628 but surged to 178.13 yen, an all-time high for the common currency. Sterling also firmed 0.05% to $1.3316.
Risk-sensitive currencies climbed on the positive trade news, with the Australian dollar strengthening 0.3% to $0.6535 and the New Zealand kiwi adding 0.2% to $0.5761.
In cryptocurrencies, momentum continued, with Bitcoin gaining 1.4% to $114,921.04 and Ether climbing 2.5% to $4,167.08.