Asian session review: the US dollar is showing negative dynamics

During today's Asian trading, the US dollar fell moderately against major currencies, continuing yesterday's decline, which was caused by profit-taking by investors after reaching the highest level since November 2, 2023.

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) fell by 0.19% to 105.75. Yesterday, the index fell by 0.35%, as market participants continued to overestimate the prospects for the Fed's monetary policy after the statements of the policymakers. Yesterday, Fed Governor Michelle Bowman said progress on slowing U.S. inflation may have stalled, and it remains an open question whether rates are high enough to ensure inflation returns to the Fed's 2% target. The focus also turned to the Fed's Beige Book, which indicated that activity in general has increased slightly since the end of February, with 10 of the 12 regions reporting slight or modest growth. “Price growth remained moderate and in line with the pace noted in the previous report. In general, contacts expect inflation to remain stable, although some producers in several regions see potential risks of higher inflation in the short term, both in raw material prices and in product prices,” the Beige Book showed. According to the CME FedWatch Tool, markets see a 16.8% probability of a 25 basis point rate cut at the Fed meeting in June, and a 46.0% probability of a rate cut in July (compared to 48.4% a week earlier). In addition, markets now expect a 44 basis point rate cut by the end of the year - that is, about two rate cuts, where at the beginning of the year they predicted six rate cuts.

The yen rose 0.1% against the US dollar, helped by statements by Japan's chief currency diplomat Masato Kanda. He said that the G7 financial leaders had confirmed their position on the undesirability of excessive currency volatility. Recently, investors have raised the bar for possible intervention by the Japanese authorities to maintain the yen exchange rate - now they point to the level of 155 compared to 152 earlier, but still believe that Japan can intervene at any moment. The last time Japan intervened in the foreign exchange market was in 2022, spending about $60 billion to protect the yen.