During today's Asian trading, the US dollar declined slightly against major currencies, but remains near the five-month high reached last week in response to escalating geopolitical tensions and a review of the Fed's monetary policy outlook.
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 0.10% to 106.05. The drop in the index is due to the easing of fears about a larger conflict in the Middle East, while market participants are also awaiting the release of key US inflation data on Friday, which could influence the Fed's next move. According to the CME FedWatch Tool, markets see a 15.2% probability of a 25 basis point rate cut at the Fed meeting in June, and a 41.5% probability of a rate cut in July (compared to 48.9% a week earlier). In addition, markets now expect a 39 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 fell 0.05% against the US dollar, to 154.69, not far from last week's 34-year low of 154.79 and close enough to the 155-level that is next on traders' alerts for possible intervention by Japanese authorities. Gradually, the focus of investors' attention is shifting to the meeting of the Bank of Japan, which will be held on Friday, while the interest rate, according to forecasts, will remain unchanged. However, on Friday, the head of the Bank of Japan, Kazuo Ueda, warned that the Central Bank could raise interest rates again if a decline in the yen significantly spurs inflation, highlighting the dilemma the weak currency has become for policymakers. Since the beginning of the year, USD/JPY has grown by about 9%.