Asian session review: the US dollar is showing positive dynamics

During today's Asian trading, the US dollar rose slightly against major currencies, partially recovering from yesterday's collapse, which was caused by strong eurozone PMI data and a disappointing report on business activity in the US private sector.

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 0.11% to 105.80. Yesterday, the index fell by 0.42%, as a report from S&P Global showed that U.S. private sector business activity continued to grow in early April, albeit at a softer pace than in March, reflecting a weaker expansion in services activity and no change in manufacturing activity. Flash U.S. Composite PMI Output Index came in at 50.9 early this month, slightly down from 52.1 in March. The latest reading continued to indicate an expansion in business activity at the U.S. companies albeit at the softest pace since last December. The next important event for the dollar will be the publication of GDP data for the 1st quarter and the personal consumption expenditures price index, the Fed's preferred inflation indicator. Economists said that the US economy remains fairly stable, and as long as it remains in this state - even with the possibility of further Fed rate hikes - the risks to the US dollar are still shifted upward. Overall, markets believe that the US Federal Reserve will be one of the last major central banks to cut rates - markets currently estimate a 72% probability of the first rate cut by September. This is in stark contrast to just a few weeks ago, when markets were expecting the monetary easing cycle to begin in June.

The Australian dollar rose 0.4% against the US dollar, as stronger-than-expected Australian inflation data forced investors to abandon hopes of easing the RBA's monetary policy in the near future. The Australian Bureau of Statistics (ABS) said that consumer price growth accelerated to 1% QoQ in the 1st quarter from 0.6% QoQ in the 4th quarter. Economists had expected the CPI to rise by 0.8%. Year-on-year, consumer inflation fell to 3.6% (the lowest value since the 4th quarter of 2021) from 4.1% in the 4th quarter. Consensus estimates suggested that inflation slowed to 3.4%. The RBA's trimmed mean CPI increased by 4.0% per annum after an increase of 4.2% per annum in the 4th quarter. This was the weakest growth since the 1st quarter of 2022, but the index remained above the central bank's target range of 2-3%. Economists had expected an increase of 3.8% per annum.

The yen fell by 0.06% against the US dollar, coming close to the 155 level, even though Japanese officials have stepped up warnings about intervention. Yesterday, Japan's finance minister issued the strongest warning to date about the possibility of intervention, saying that last week's meeting with American and South Korean counterparts laid the groundwork for Tokyo to act against excessive yen movements. Investors are also preparing for the meeting of the Bank of Japan, the results of which will be announced on Friday, while experts expect the Central Bank to leave policy parameters and bond purchases unchanged.