The dollar rose on Tuesday, driven by a sharp decline in Japanese bond yields and stronger-than-expected U.S. consumer confidence data.
The yen weakened as Japan’s Ministry of Finance considered reducing issuance of super-long bonds, following a rise in yields and reduced demand from traditional buyers like life insurers. The dollar gained 1% to 144.28 yen, while the euro dropped 0.46% to $1.1335.
Market sentiment shifted after Bloomberg reported that Japanese authorities had circulated a questionnaire to primary dealers about bond issuance and market conditions. Sources indicated Japan may cut issuance of super-long notes in response to recent market developments.
The greenback extended gains following a consumer confidence report that showed improved sentiment among U.S. households in May. Upcoming data releases include April’s personal consumption expenditures report, which is closely watched by the Federal Reserve for inflation trends.
Meanwhile, the euro was pressured by figures showing French inflation fell to its lowest level since late 2020. Despite an easing of U.S.-EU trade tensions after President Trump withdrew a threat to impose 50% tariffs on European imports, concerns remain about broader trade policy.
European Union officials have reportedly requested investment details from top companies as they prepare for trade discussions with Washington.
Although recent U.S.-China tariff reductions have helped ease some investor concerns, long-term expectations point to continued weakness in the dollar due to persistent protectionist measures. In the U.S., attention is also on a tax and spending bill under debate in Congress, which could significantly increase national debt.
While initial analysis suggests the plan may reduce the deficit-to-GDP ratio slightly, disagreements persist across the political spectrum regarding its provisions.
Elsewhere, the dollar climbed 0.77% against the Swiss franc to 0.827. Swiss National Bank Chairman Martin Schlegel said inflation in Switzerland could turn negative in the near future but noted this may not prompt an immediate policy response.
