Dollar Dips as Rate Hike Bets Plummet to 12%

The US dollar weakened on Tuesday as traders reduced their expectations for Federal Reserve rate hikes. The ICE US Dollar Index dropped 0.4% to 103.20, while USD/JPY traded around 145.30.

Market participants scaled back their bets on additional Fed tightening after softer-than-expected economic data and cautious comments from officials. According to CME Group's FedWatch tool, the probability of a rate hike at the next meeting fell to 12% as of Tuesday, down from 28% a week earlier.

The yen maintained its recent gains following suspected Japanese intervention. The Ministry of Finance has not confirmed intervention, but market participants noted a sharp spike in yen volume. Japan's top currency diplomat, Masato Kanda, reiterated that authorities are watching market moves closely and will act against excessive volatility.