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 its highest level since November 14, as strong US economic data and statements by FOMC officials lowered expectations for an early easing of the Fed's monetary policy.

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 0.03% to 104.78. Recent US data contributed to a further decrease in expectations that the Fed will begin to ease policy in June, and also increased speculation that the US Central Bank will implement fewer than three rate cuts this year. According to the CME FedWatch Tool, markets see a 2.9% probability of a 25 basis point rate cut at the Fed meeting in May, and a 63.6% probability of a rate cut in June (compared to 70.1% a week earlier). In the coming days, the markets will closely monitor the comments of the Fed policymakers, as well as numerous data on the US labor market, especially Friday's statistics on employment and wage growth in March. If data shows that the U.S. economy created more jobs than expected in March, or an acceleration in annual wage growth, it could strengthen bets that the Fed will push back the timing of its first interest rate cut and revise the forecast for rate cuts for 2024 from three to two.

The Chinese yuan declined slightly against the US dollar, despite the favorable PMI data. However, analysts warned that it is still too early to celebrate positive data outcomes as a projected property sector crisis remains a major drag for the Chinese economy and investor confidence. According to the report from Caixin/S&P Global, the growth of activity in the service sector accelerated in March (for the first time in three months), confirming economists' forecasts and recording the 15th consecutive monthly expansion, helped by an increase in new orders. Business confidence also improved, although employment levels declined amid evidence of reduced capacity pressures. The service PMI rose to 52.7 points in March from 52.5 points in February. Although the rate of expansion was faster, it remained below the long run series average. The survey also showed that overall private sector activity growth was the strongest since May 2023. The composite output index advanced to 52.7 in March from 52.5 in February.

The yen fell 0.1% against the US dollar, to 151.66, approaching a 34-year low of 151.975 reached in March. However, the heightened threat of currency intervention by Tokyo capped further declines in the Japanese currency. Japanese officials have been making desperate efforts for several days in an attempt to protect the currency, with the overwhelming threat of an intervention presenting stiff resistance for the greenback at the 152 yen level.