Asian session review: the US dollar has stabilized against major currencies

During today's Asian trading, the US dollar consolidated against major currencies, remaining near a 2-year high amid expectations of a slower Fed monetary policy easing cycle next year. Meanwhile, in a holiday-curtailed week, trading volumes are likely to thin out as the year-end approaches.

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 0.07% to 108.11. Regarding the Fed's policy outlook, markets are now pricing in just about 35 basis points of easing for 2025. According to the CME FedWatch Tool, markets see an 8.6% probability of a 0.25% rate cut in January (compared to 16.8% a week ago). The latest US inflation data eased some concerns about how much the Fed may cut in 2025, but experts warn that if US inflation proves more stable than expected in the coming months, the Fed's more hawkish stance could set off near-term market volatility.

The Chinese yuan declined 0.1% against the US dollar, despite news of additional economic stimulus measures from the Chinese government. The sources said that the authorities have agreed to issue special treasury bonds worth 3 trillion yuan next year, which would be the highest on record. Earlier, the country's finance ministry announced that the authorities would increase fiscal support for consumption next year by increasing pensions and subsidies for health insurance for residents, as well as expanding consumer goods trade-ins. However, market participants are still cautious about the Chinese economy, given the crisis in the real estate market, weak consumer confidence and the threat of high tariffs from the United States.

The yen rose 0.1% against the US dollar, responding to statements by Japanese Finance Minister Katsunobu Kato, who reiterated concerns over the yen's sharp depression, warning speculators that authorities stand ready to intervene. Speaking at a press conference, Kato emphasized the importance of stable currency movements reflecting economic fundamentals. His remarks follow last week’s stronger warnings about the yen's rapid decline, which he described as "alarming".