Asian session review: the US dollar is showing positive dynamics

During today's Asian trading, the US dollar rose moderately against major currencies, continuing yesterday's increase, while investors are waiting for the announcement of the results of the Fed meeting.

The US Dollar Currency Index (DXY), which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona) rose by 0.30% to 103.90 (the highest value since March 1). Yesterday, the index gained 0.42% as investors adjusted their positions ahead of the Fed meeting. Although economists do not expect the Fed to make changes to policy parameters, market participants are looking forward to the publication of updated forecasts of politicians on the economy and interest rates. Some economists warn that the Fed's so-called “dot plot” may signal a smaller rate cut than previously expected, amid renewed inflation risks. In December 2023, policymakers predicted three rate cuts of 25 basis points each for 2024. Changes in economic forecasts and/or rate forecasts may prompt markets to reconsider their expectations that the first interest rate cut will occur in June. According to the CME FedWatch Tool, markets see a 5.8% probability of a 25 basis point rate cut at the Fed meeting in May, and a 64.0% probability of a rate cut in June (compared to 65.8% a week earlier), with 70 basis points of cuts priced in for this year.

The yen fell 0.4% against the US dollar, hitting a 4-month low, as traders believe that Japan's monetary policy will remain soft, even after the Central Bank announces the end of its policy of negative interest rates. Yesterday, the Bank of Japan raised the rate for the first time in 17 years, but added that it expects favorable conditions to remain for some time, keeping pressure on the yen, as the difference in rates between the United States and Japan remains significant.