The U.S. dollar firmed against major currencies on Tuesday after Federal Reserve Chair Jerome Powell signaled a more cautious approach to rate cuts, pushing back against expectations of larger reductions. Powell’s hawkish tone at a conference suggested that the Fed would likely continue with quarter-percentage-point cuts rather than more aggressive moves. This followed a half-point cut last month, with traders now adjusting their expectations for future rate changes. The dollar index rose slightly, and the greenback gained 0.45% against the yen, reflecting market responses to Powell’s remarks and upcoming U.S. economic data, including the jobs report.

Meanwhile, the yen steadied after volatility surrounding Japan’s new Prime Minister Shigeru Ishiba, who is seen as a policy hawk. The Bank of Japan’s recent meeting minutes indicated a cautious approach to near-term interest rate hikes, reinforcing the expectation of continued dovish policies. In Europe, the euro remained near a one-week low after a drop in German inflation, fueling speculation about further European Central Bank rate cuts. ECB President Christine Lagarde noted confidence in inflation returning to target soon, potentially influencing the bank’s next policy decision.