Why Could Macro Shifts in the Dollar and Yen Impact Bitcoin?

The US Dollar Index (DXY) has fallen to a four-month low amid growing speculation of a “yen intervention” by the US and Japan.

Analysts warn that the DXY may face further downside pressure. Now, market attention is shifting to what the next policy moves could mean for digital assets.

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Why Is The US Dollar Index (DXY) Dropping?

The US Dollar Index (DXY), which tracks the value of the US dollar against a weighted basket of six major currencies, is coming under mounting pressure in global markets. After posting its worst annual performance since 2017, the dollar has started the year on a weak footing, according to The Kobeissi Letter.

So far this month, the DXY has dropped around 1.5%. At the time of writing, the index stood at 97.1, its lowest level since September. At the same time, traditional safe-haven assets such as gold and silver have rallied to fresh record highs.

The latest decline comes amid speculation over a potential yen intervention. Reuters reported that the New York Federal Reserve conducted rate checks on Friday, a move markets interpreted as a signal that the US could support Japan in intervening in currency markets.

Expectations of coordinated action pushed the yen to a two-month high, while weighing on the dollar. Meanwhile, investors are positioning cautiously ahead of the upcoming Federal Reserve policy meeting and a potential announcement by the Trump administration regarding Jerome Powell’s successor.

Despite President Trump’s repeated calls for aggressive rate cuts, market expectations for an imminent policy shift remain low. Data from the CME FedWatch Tool shows the probability of a 25 bps rate cut at just 2.8%.

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Analysts Highlight Bearish Outlook for US Dollar Index

Against this backdrop, analysts are warning that further downside risks may lie ahead for the US Dollar Index. Market analyst Rashad Hajiyev noted that the scheduled FOMC meeting could act as a catalyst for a breakdown below the DXY’s 18-year support level.

Another analyst, Ted Pillows, highlighted a descending triangle formation on the DXY chart. This technical pattern is often associated with bearish continuation.

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The structure suggests increasing downside pressure and adds to concerns that the index could see a deeper decline.

Will Yen Strength and Dollar Weakness Reshape Bitcoin’s Trajectory?

The upcoming moves in the DXY could have implications for the crypto market. Historically, Bitcoin, the largest cryptocurrency by market capitalization, has shown an inverse correlation with the US Dollar Index. As a result, further weakness in the DXY could support upside momentum for BTC.

At the same time, a weaker dollar typically lowers borrowing costs, improves global liquidity, and encourages risk-taking, conditions that tend to favor digital assets.

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Notably, one analyst highlighted that Bitcoin’s correlation with the Japanese yen is currently near record highs. This suggests that a yen intervention that strengthens the currency could also support BTC.

Analyst Donny added that DXY movements can have immediate and delayed impacts on risk assets. He said that if DXY drops below the key 96.2 level, an effect is expected around April or May 2026.

The next several weeks may define both the dollar’s direction and the crypto market’s path.