May 7 (Reuters) - The U.S. dollar rose against the safe-haven yen and Swiss franc while steadying versus the euro as investors looked towards the impending outcome of the Federal Reserve policy meeting later in the session and tariff negotiations.
U.S. Treasury prices rose on Tuesday, as a well-received auction of the benchmark 10-year note suggested demand for Treasuries remained intact after a trade war shook investor confidence in U.S. assets.
The greenback dropped sharply on the U.S. tariff announcement early last month before jumping on April 22 as U.S. Treasury Secretary Scott Bessent suggested there would be a de-escalation in U.S.-China trade tensions.
Bessent and chief trade negotiator Jamieson Greer will meet China's economic tsar, He Lifeng, in Switzerland this weekend for talks that could be the first step toward resolving a trade war that has disrupted the global economy.
The Fed is expected to leave interest rates unchanged on Wednesday, with investors focusing on any clues about the rate outlook as U.S. tariffs cast uncertainty over the economy.
"The unknowability of the inflationary implication of tariffs, and the longer-term effect from a rise in inflation expectations compel the FOMC to dissuade traders from assuming that aggressive rate cuts are ahead," said Thierry Wizman, global forex and rates strategist at Macquarie.
The greenback was up 0.6% versus the yen at 143.28 , breaking a three-day falling streak, with Japanese markets reopening after a two-day holiday.
Analysts flagged Treasury Secretary Scott Bessent's testimony to the House on the 'State of the International Financial System' later in the day.
"He'll argue that U.S. bond markets are functioning in an orderly manner and probably repeat the mantra that Washington retains a strong dollar policy," said Chris Turner, head of forex strategy at ING.
"It will be interesting, however, if he's quizzed on whether currency deals are part of the trade negotiations currently underway with 17 other trading partners."
The greenback was up 0.15% against the Swiss franc at 0.8233. On Monday, it hit its lowest since January 2015 of 0.8032.
The Swiss National Bank is ready to intervene in the foreign currency markets and cut rates even below zero to prevent inflation falling below its price stability target, Chairman Martin Schlegel said on Tuesday.
The euro was flat at $1.1366, after rising 0.48% the day before.
Forex markets took in stride the news that German conservative leader Friedrich Merz was elected chancellor by parliament on Tuesday in a second round of voting after an unprecedented defeat on the first attempt.
France and Germany will set up a joint defense security council that will meet regularly as part of their efforts to boost defense investments.
Earlier this week, a record rally in the Taiwan dollar spread to other currencies in Asia, such as the Singapore dollar and the South Korean won .
The Taiwan dollar has surged against the U.S. currency since U.S. President Donald Trump's April 2 announcement of sweeping tariffs on trade partners.
The won reached a six-month high at Wednesday's opening, but subsequently fell 1.5%. The yuan weakened as China announced a long-awaited rate cut.
Currency markets seemed a bit calmer on Wednesday following the stunning two-day leap for Taiwan's currency, which some analysts said was a "warning shot" for the greenback.
Bitcoin rose 2.5% to 97,055, after last week hitting 97,913.35, its highest since February 21.
Reporting by Stefano Rebaudo, additional reporting by Rocky Swift; Editing by Bernadette Baum
