Dollar Steady as Fed Cues Loom; Yen Firms on Strong Wage Data

The U.S. dollar was little changed on Tuesday as markets awaited fresh signals on Federal Reserve policy, while the Japanese yen edged higher following stronger wage data. USD/JPY fell about 0.2%, although the yen remained near multi-decade lows and continued to draw attention for possible intervention. The euro and pound each slipped roughly 0.1%, while renewed tensions around the Strait of Hormuz contributed to a more cautious tone across foreign exchange markets.

Japanese wage income increased for a fifth consecutive month in May, although the pace of growth slowed as inflation linked to Middle East-related energy costs weighed on consumer spending. The data could support expectations for further policy normalization by the Bank of Japan, although the yen's gains proved short-lived amid persistent currency weakness and repeated warnings from Japanese officials against excessive market speculation. Separately, Economic Policy Minister Minoru Kiuchi denied reports that Tokyo was pressuring the Bank of Japan to keep interest rates low, amid continued attention on the government's fiscal spending plans.

The U.S. Dollar Index held broadly steady after declining last week following weaker-than-expected U.S. payrolls data. Market attention now turns to Wednesday's FOMC meeting minutes for additional insight into policymakers' assessment of inflation and the interest rate outlook.

Elsewhere, USD/CNY was little changed ahead of Thursday's China inflation data, AUD/USD edged lower, and USD/KRW rose 0.4% amid a decline in South Korean equities.

What's next: Market participants may monitor the FOMC meeting minutes, China's inflation data, and any developments related to Bank of Japan intervention for further direction in currency markets.

This article is for general market information only and does not constitute investment advice.