Most FX major currencies firmed on Tuesday as the dollar retreated before a swathe of key economic prints, with the Japanese yen rebounding after Tokyo issued a strong warning that it will intervene in currency markets.
The dollar fell in holiday-thinned trade, with focus squarely on upcoming gross domestic product and personal consumption expenditures index readings due later in the day. Both prints are likely to factor into expectations for U.S. interest rates going into 2026.
Asian and European trading volumes were also dulled by the year-end holidays, with most regional currencies sitting on annual gains against the dollar. The Japanese yen was also mostly unchanged against the dollar in 2025 after logging wild swings through the year.
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Japanese yen firms sharply on intervention threat The yen’s USD/JPY pair fell 0.7% on Tuesday, retreating from some its highest levels this year after a warning from Finance Minister Satsuki Katayama.
Katayama said recent moves in the yen were driven by speculation and did not reflect market fundamentals, and warned that the government would take “appropriate action against excessive moves.”
Katayama’s warning was the most decisive yet to date from Tokyo over bets against the yen, and sparked a sharp recovery in the currency on fears of government-driven dollar selling.
Tokyo has in the past intervened with USD/JPY in the 155 yen to 160 yen range. Dollar falls with GDP, PCE data on tap The dollar index and dollar index futures fell over 0.3% in European trade, after a middling session on Monday. The EUR/USD rose nearly 0.3% by 04:35 ET (09:35 GMT), while GBP/USD added almost 0.4%.
The dollar was hit by caution ahead of key readings on the U.S. economy, which were delayed by a government shutdown in October and early-November.
Gross domestic product data for the third quarter is due later in the day, and is expected to show economic growth cooling from the prior quarter. PCE price index data– the Federal Reserve’s preferred inflation gauge, is also due later on Tuesday, and is expected to show inflation remaining sticky.
But analysts warned that economic prints for October and November are likely to have been disrupted by the shutdown, and that prints for December will have more bearing on interest rates.
Markets are largely betting on an interest rate hold by the Fed in January, although rates are still expected to fall in the long term.
