The U.S. dollar steadied on Wednesday as investors awaited another round of key inflation data, while the Japanese yen slid to its weakest level in roughly 18 months.
By 04:30 ET (09:30 GMT), the Dollar Index—which measures the greenback against a basket of six major currencies—was little changed at 98.910, after starting the week under modest pressure.
Dollar steadies ahead of inflation data
The dollar briefly dipped on Tuesday after consumer price figures suggested the Federal Reserve could have slightly more room to ease policy. Core CPI rose 0.2% in December, bringing annual inflation to 2.6%, just below expectations.
“Despite the softer CPI reading, the market reaction actually reinforced our near-term constructive view on the dollar,” analysts at ING said in a note, pointing out that expectations for Fed rate cuts barely shifted and the dollar quickly recovered.
Attention now turns to additional U.S. data due later on Wednesday, including producer prices for October and retail sales for November.
The greenback also found support after Jerome Powell received coordinated backing from global central bank officials. Their support followed concerns about the Fed’s independence after the Trump administration threatened criminal charges related to Powell’s testimony on renovation work at the central bank’s headquarters.
ING added that the episode could ultimately strengthen the dollar if Powell is perceived as taking a more resolutely hawkish stance to defend the Fed’s autonomy.
Markets are also watching closely for a potential ruling from the U.S. Supreme Court on the legality of President Donald Trump’s tariff policies, which could come later in the session.
Europe and Greenland talks in focus
In Europe, EUR/USD edged 0.1% higher to 1.1650 ahead of talks involving U.S., Danish and Greenland officials over the future of the resource-rich island.
ING noted that U.S. rhetoric on Greenland has so far had limited market impact, meaning little risk premium would need to unwind even if discussions move toward cooperation. Still, constructive headlines could remove a lingering geopolitical risk for European currencies. The bank continues to target EUR/USD near 1.1600 in the coming days.
GBP/USD also advanced, rising 0.2% to 1.3451.
Yen pressured by “Takaichi trade”
In Asia, USD/JPY climbed 0.1% to 159.15 after earlier touching its highest level since June 2024, as the yen extended recent losses.
Media reports indicated that Japan’s Prime Minister Sanae Takaichi may soon inform her cabinet of plans to dissolve parliament, with a snap lower-house election potentially set for February 8.
Investors have focused on Takaichi’s support for expansionary fiscal policies, including large stimulus measures aimed at boosting growth and combating deflation. Such policies could add to government debt and delay tighter monetary policy from the Bank of Japan, weighing further on the yen. This dynamic has become known in markets as the “Takaichi trade.”
Elsewhere, USD/CNY slipped 0.1% to 6.9736 following Chinese trade data showing a stronger-than-expected surplus in December, with exports beating forecasts and imports growing at a solid pace. For all of 2025, China’s trade surplus expanded to a record $1.25 trillion, as strong demand from other regions offset weaker shipments to the United States.
AUD/USD was little changed at 0.6688.
