Dollar Slips, Yen Jumps Before Fed, ECB Decisions
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- The yen strengthened 0.06% to 158.91 per dollar, rallying from levels that had raised intervention concerns ahead of Japanese PM Sanae Takaichi's Wednesday meeting with President Trump in Washington.
- The euro held steady at $1.1538, while traders now price in almost two ECB rate hikes in 2026 — a sharp reversal from the roughly 50% chance of a cut seen before the Middle East conflict began.
- The dollar index traded at 99.56 after a two-day decline, having touched a 10-month high last week as the three-week-old U.S.-Israeli war with Iran drove investors into dollar-denominated haven assets.
- The Federal Reserve announces its policy decision Wednesday, with rates expected unchanged, but markets have scaled back 2025 easing expectations to just about 25 basis points of cuts amid the conflict.
- President Trump postponed his planned March 31–April 2 trip to Beijing to meet Xi Jinping — the first China visit of his second term — citing the crisis's disruption to diplomacy and trade.
- Iran confirmed security chief Ali Larijani was killed by Israel, the most senior figure targeted since the first day of the war, while bitcoin fell 0.48% to $74,193.50 and ether slipped to $2,327.66.
Why it matters: The Middle East crisis has erased prior easing bets — markets now price just 25 basis points of Fed cuts this year — and triggered a dramatic ECB pivot from rate cuts to nearly two hikes in 2026. The dollar's haven bid is pushing the yen dangerously close to Japan's intervention threshold as PM Takaichi heads to Washington.
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