Dollar faces downward pressure, traders weigh the possibility of the US assisting Japan in intervening in the foreign exchange market.

The US dollar against major currencies fell on Monday as investors are weighing the possibility of the US assisting Japan in intervening in the foreign exchange market, and how it could exacerbate negative sentiment in the market towards the global reserve currency. During the Asian trading session, the Japanese yen rose nearly 1% against the US dollar as the market speculated that Japanese authorities may be preparing to intervene to boost the struggling yen, with the US government potentially providing assistance. The US dollar index fell by 0.4% intraday, continuing the decline of 1.6% from the previous week. For many observers of the US dollar, signs of the US possibly supporting the yen have reignited discussions of coordinated exchange rate interventions to weaken the US dollar against major trading partner currencies. Discussions on this topic heated up last Friday when traders reported that the New York Federal Reserve Bank had contacted several financial institutions to inquire about the yen exchange rate. Wall Street sees this as a potential signal that Japan may intervene in the market with US support.