The US dollar fell on Tuesday as traders prepared for a series of central bank meetings expected to deliver an interest rate cut by the Federal Reserve, while investors also focused on President Donald Trumps Asia tour amid hopes for a trade deal with China.

The Japanese yen rose more than 0.6% to 151.855 per dollar ahead of this weeks Bank of Japan meeting, where policymakers are expected to keep rates unchanged. Markets, however, will be watching closely for signals on the timing of the next rate hike.

Yen gains were supported by comments from US Treasury Secretary Scott Bessent, who called for disciplined monetary policy after meeting his Japanese counterpart, Satsuki Katayama the latest in a series of remarks criticizing the Bank of Japans slow pace of tightening.

In Tokyo, Trump met Japans new Prime Minister Sanae Takaichi, praising her pledge to accelerate military capacity-building and signing new agreements on trade and rare-earth minerals.

Hopes for a Trade Deal with China

Although early signs of easing tensions between the worlds two largest economies spurred a wave of risk-taking on Monday, investors remain cautious that any potential deal may fall short of expectations.

The worlds attention now turns to Thursdays meeting between Trump and Chinese President Xi Jinping in South Korea.

Speaking aboard Air Force One before landing in Tokyo, Trump said, I have great respect for President Xi, and I believe well come out with an agreement.

Chinese officials, meanwhile, have maintained a reserved tone and offered no clear indication of potential outcomes from the talks.

Vasu Menon, Executive Director of Investment Strategy at OCBC Bank, said a perfect solution or even a comprehensive settlement is unlikely, suggesting unresolved issues could be postponed.

When two global economic powers led by strong leaders try to reach an agreement, the process is never smooth, Menon added. Still, he noted that any tangible progress could be enough to reassure markets and sustain the stock rally.

Rate Cut Expectations Pressure the Dollar

The dollars decline was also driven by expectations of a 25-basis-point rate cut by the Federal Reserve. The euro rose to a one-week high at 1.1668 dollars, while the British pound gained 0.25% to 1.3368 dollars.

The US Dollar Index, which measures the greenbacks performance against six major peers, slipped 0.19% to 98.58 after a 0.15% drop in the previous session.

Markets Await the Fed Meeting

While a rate cut is almost certain, investors will focus on whether the Fed signals an end to its quantitative tightening program. Markets will also watch Chair Jerome Powells comments for clues about future cuts, especially amid the ongoing US government shutdown that continues to delay economic data releases.

Traders also expect another rate reduction in December.

David Merkel, Chief Economist at Goldman Sachs, said: We dont expect explicit guidance on the December meeting, but Powell is likely to reference the September projections that pointed to a third rate cut by then.

The Fed lowered rates by 25 basis points last month.

Other Central Banks Stay Cautious

In Europe, the European Central Bank is expected to leave interest rates unchanged again on Thursday, while traders remain divided on whether monetary easing could resume next year.

In the Asia-Pacific region, the Australian dollar often viewed as a proxy for risk appetite rose 0.11% to 0.6563 US dollars, a two-week high, while the New Zealand dollar edged slightly higher to 0.5782.