Asian session review: the US dollar is showing a weak increase

During today's Asian trading, the US dollar rose slightly against major currencies, but remains near the lowest level of 2024, while market participants are preparing for a speech by Fed Chairman Powell. 

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 0.08% to 101.52. However, since the beginning of the week, the index has fallen by 0.86%. The main factor in the recent fall in the US currency was the decline in the yield of 10-year US Treasury bonds to the lowest level since August 5. A weak monthly payrolls report at the start of this month was a catalyst for a spike in volatility across asset classes, leaving market participants bracing for another potential shock with revised payrolls data data due later Wednesday. As for Powell's speech, which will take place tomorrow, investors hope to get hints about the likely size of the rate cut in September and whether the Central Bank will ease monetary policy at each subsequent meeting. Experts warn that any clear risks of a more significant rate cut could signal a policy mistake by the Fed and higher risks of recession. According to the CME FedWatch Tool, markets see a 31.5% probability of a 0.5% rate cut in September (down from 36% the week before), and a 68.5% probability of a 0.25% rate cut (up from 64% the week before).

The yen fell 0.3% against the US dollar. Traders will be closely watching today's special session of the Japanese parliament, where policymakers will consider the Bank of Japan's unexpected decision to raise interest rates last month and the central bank's sudden turn to a hawkish course. Bank of Japan Governor Kazuo Ueda will deliver a speech, and the focus will be on his tone after his deputy Shinichi Uchida took a more dovish stance earlier this month, which helped calm markets.