The US dollar hovered near four-year lows on Wednesday as investor confidence in the greenback weakened further after President Donald Trump dismissed concerns over its recent decline, fuelling fresh selling across currency markets ahead of a closely watched Federal Reserve policy decision.

The dollar’s losses followed heavy selling in the previous session, which pushed the euro above the $1.20 mark for the first time since 2021, underscoring growing scepticism about the U.S. economic outlook and the future path of interest rates.

In early Asian trading, the euro eased slightly to $1.1994, but remained near multi-year highs after gaining more than 1% overnight. The Japanese yen strengthened to its firmest level in nearly three years, while sterling held close to a two-year high against the dollar.

Trump’s comments, in which he played down the currency’s weakness and reiterated his preference for a competitive dollar to support US exports, added to pressure on the greenback. Investors interpreted the remarks as a signal that the administration is unlikely to intervene verbally or otherwise to stabilise the currency in the near term.

The US dollar index, which measures the currency against six major peers, hovered near levels last seen in early 2022, down more than 8% so far this year, as traders priced in expectations of interest-rate cuts by the Federal Reserve later in 2026.

Attention now turns to the Fed’s policy announcement later on Wednesday, where policymakers are expected to hold rates steady but may offer clues on the timing and scale of potential easing as inflation shows signs of moderating and economic growth cools.

Meanwhile, stronger-than-expected data from the euro zone and resilient labour market indicators in the UK have reinforced the divergence between the US. and other major economies, lending further support to the euro and pound.

Emerging market currencies also benefited from the softer dollar, with Asian units broadly firmer as lower US yields encouraged capital flows into higher-yielding assets.

Analysts cautioned, however, that volatility could increase sharply following the Fed decision and upcoming US economic data, including inflation and employment figures, which could challenge the market’s increasingly bearish view on the dollar.