During today's Asian trading, the US dollar fell slightly against major currencies, but remained near the highest level since July 30, reached yesterday amid expectations of a slower easing of the Fed's monetary policy and an increase in treasury bond yields. The dollar has also benefited from a recent rise in market expectations of Donald Trump's victory in the presidential election, which would likely bring about inflationary policies such as tariffs.
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 0.11% to 104.32. Since the beginning of October, the index has gained 3.5%, as a number of favorable macroeconomic data and some "hawkish" comments from the Fed's policy reduced expectations of further aggressive easing of the Fed's monetary policy. Earlier this week, Kansas City Fed President Jeffrey Schmid said he would prefer to "avoid outsized moves," and Philadelphia Fed President Patrick Harker backed "a slow, methodical approach" to further easing. According to the CME FedWatch Tool, markets see a 90.9% probability of a 0.25% rate cut at the November meeting (compared to 87.7% a week earlier) and a 68.3% probability of a 0.25% rate cut in December (compared to 71.7% a week earlier), with a 0.41% rate cut expected by the end of the year.
The yen rose 0.4% against the US dollar after falling 1.12% yesterday and breaking the 153 level for the first time since July 31. The strengthening of the yen was caused by a decrease in US bond yields and statements by the Japanese Finance Minister, who indicated that officials were "watching exchange rate changes with increased vigilance." This statement increased the risk of intervention to support the Japanese currency. The focus also remained on yesterday's statements by the head of the Bank of Japan, Kazuo Ueda, who warned that "it still takes time" to achieve the 2% inflation target sustainably, and made it clear that rate hikes would be carried out "cautiously and gradually." The next meeting of the Central Bank will be held on October 31, while consensus estimates suggest that the rate will remain unchanged.