The dollar weakened on Tuesday ahead of a series of central bank meetings that are likely to lead to interest rate cuts in the US and as investors continued to monitor President Donald Trump's visit to Asia, hoping for a trade deal with China.

The yen strengthened more than 0.6% to 151.855 per dollar ahead of this week's Bank of Japan meeting, where the central bank is expected to keep interest rates unchanged, but focus will be on whether it provides any clues about the timing of the next hike.

Comments from US Treasury Secretary Scott Bessent boosted the yen as he called for "sound monetary policy" during his meeting with Japanese Finance Minister Satsuki Katayama, in his latest dig at the BOJ's slow pace of rate hikes.

Investors also weighed Trump's meeting with Japan's new Prime Minister, Sanae Takaichi, in Tokyo on Tuesday. There, Trump welcomed his pledge to accelerate military development and signed a trade and rare earth metals deal.

HOPE A CHINA TRADE DEAL REMAINS INTACT

Although early signs of easing trade tensions between the world's two largest economies sparked a risk rally on Monday, with the dollar weakening against other major currencies, investors are concerned that a genuine Sino-US deal may not provide much to celebrate.

The main focus will be on the meeting between Trump and Chinese President Xi Jinping in South Korea on Thursday. "I have great respect for President Xi and I think we'll get a deal," Trump told reporters on Air Force One before landing in Tokyo.

Chinese officials have so far been cautious in their trade talks with their US counterparts and have commented little on the potential outcome.

Vasu Menon, managing director of investment strategy at OCBC, said there likely won't be "a perfect resolution or even a resolution in some cases, and issues could be postponed for later discussion." "When you have two economic superpowers with stubborn leaders trying to reach a deal, you can imagine it's not going to be smooth sailing," he said.

However, Menon added that if the two leaders are able to achieve concrete progress, it may be enough to satisfy the market at this time, as investors look for silver linings to keep the upward momentum going.

Anticipation surrounding the outcome of trade talks and expectations of a 25 basis point interest rate cut from the Federal Reserve have weakened the dollar. The euro hit a one-week high of $1.1668 on Tuesday, while the pound sterling last bought $1.3368, up 0.25% on the day.

The dollar index, which measures the US currency against six other currencies, weakened 0.19% to 98.58, after falling 0.15% in the previous session. (alg)

Source: Reuters