Asian session review: the US dollar is showing slightly positive dynamics

During today's Asian trading, the US dollar rose slightly against major currencies after yesterday's fall caused by weak US inflation data, which increased the likelihood of easing the Fed's monetary policy.

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 0.06% to 104.50. Yesterday, the index fell by 0.66%, reaching its lowest level since June 7, as data showed that the consumer price index fell by 0.1% in June after being unchanged in May. On an annual basis, the CPI rose by 3%, which is the weakest increase in a year. Core prices increased by 0.1% compared to May and by 3.3% year-on-year. Overall, these data strengthened the case for a Fed rate cut in September. According to the CME FedWatch Tool, markets see a 6.7% probability of a 25 basis point rate cut at the Fed meeting in July, a 92.5% probability of a rate cut in September, and a 96.7% probability of monetary policy easing in November. Meanwhile, today the US Department of Labor will present a report on producer prices for June. Economists expect the producer price index to rise 0.1% m/m after falling 0.2% m/m in May, while the annual growth rate of producer prices accelerated to 2.3% from 2.2%.

The yen fell by 0.25% against the US dollar after rising by 1.78% yesterday, helped by the US inflation report. At the same time, a number of experts pointed out that yesterday's yen rally was caused by the interventions of the Japanese government. Tokyo's chief currency diplomat Masato Kanda said today that the authorities would take the necessary measures in the foreign exchange market, but declined to comment on whether the authorities had intervened. "Currency interventions should certainly be rare in a floating exchange rate market, but we will need to respond appropriately to excessive volatility or erratic actions," Kanda said. The usual absence of any official comment on intervention has shifted investors' focus on money market data due later on Friday that may shed light on whether the authorities had stepped in.