The U.S. dollar fell sharply Monday, hitting a four-month low, while the Japanese yen surged on speculation of coordinated intervention by U.S. and Japanese authorities. The Dollar Index dropped 0.4% to 96.975, with most losses versus the yen, as market focus turned to intervention risks ahead of the Federal Reserve's policy meeting.

The move follows reports of rate checks by the New York Fed on the USD/JPY pair, a potential prelude to joint action. Analysts at ING note the dollar's drop isn't fundamentally driven but comes at a geopolitically fragile time. The yen's rally reverses its recent weakness, which had pushed it to 18-month lows.

In Europe, the euro and Swiss franc gained as capital flowed out of the dollar. EUR/USD rose 0.2% to 1.1853, while USD/CHF fell 0.4% to 0.7773, a level that could pressure the Swiss National Bank. Markets now await the Fed's decision and guidance on potential rate cuts later this year.