During today's Asian trading, the US dollar rose slightly against major currencies and is preparing to record another weekly increase amid a revision of the prospects for easing the Fed's monetary policy and increased expectations of Donald Trump's victory in the presidential election.
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 0.05% to 104.11. This week, the index rose by 0.6%, while the index has gained 3.3% since the beginning of October. Overall, recent economic data and some "hawkish" comments from Fed officials have lowered expectations regarding the extent of monetary policy easing in the United States in the coming months. According to the CME FedWatch Tool, markets see a 97.0% probability of a 0.25% rate cut at the November meeting (compared to 90.4% a week earlier) and a 72.8% probability of a 0.25% rate cut in December (compared to 76.8% a week earlier). At the same time, the "Trump trade" has been gathering momentum with a sharp rise in the odds of a second Donald Trump's presidency on some betting platforms, although polls have the race neck-and-neck. The US dollar is in demand amid expectations that Trump will introduce additional tariffs and taxes, seen as inflationary by many in the markets.
The yen resumed its decline against the US dollar after yesterday's growth (+0.61%), caused by statements by the Japanese Finance minister that officials are "watching exchange rate changes with increased vigilance," citing the risk of intervention. Meanwhile, investors are being cautious ahead of the Japanese general election, which will take place over the weekend and is likely to complicate the Bank of Japan's plans to normalize policy. Opinion polls show that the ruling Liberal Democratic Party (LDP) may lose its long-standing dominance. Uncertainty and the prospect of political instability may affect the Bank of Japan's plans to raise interest rates. The next meeting of the central bank will be held on October 30-31.