Analyst: Joint intervention by the US and Japan has triggered the continued decline of the US dollar, though fundamentals may still remain positive going forward.

On Monday, the U.S. dollar extended its decline as the U.S. and Japan intervened jointly in the foreign exchange market to support the yen. However, the root cause of the dollar’s recent weakness dates back to last week’s Federal Reserve meeting, where the Fed decided to hold interest rates steady, sparking market doubts about new Chair Walsh’s ability to fight inflation. ING foreign exchange strategist Francesco Pesole said: "All of this started after the Fed meeting. Markets had previously held large long positions in the U.S. dollar. According to positioning indicators, short-term investors have generally been heavily bullish on the dollar." Some strategists noted that to avoid further pressuring the dollar, the U.S. Treasury may use euros instead of dollars to fund its yen purchases. Pesole added that many traders are considering shifting to establishing long U.S. dollar short positions, though he believes Japan’s foreign exchange intervention is only a temporary measure—the Fed’s policy will remain the key determinant of the dollar’s trajectory. Jefferies strategist Mohit Kumar pointed out that if oil prices do not drop significantly, the Fed’s inaction on inflation will erode Walsh’s credibility. "Beyond the intervention factor, I believe fundamentals still weigh against the yen and favor the U.S. dollar. Pressure on the Fed to raise interest rates will continue to mount," he said. (Jin10)