Asian session review: the US dollar is showing negative dynamics

During today's Asian trading, the US dollar declined markedly against major currencies, while the Japanese yen jumped by 2.2% against the US dollar, reaching its highest level since January 2, which was caused by increased demand for safe haven assets in response to fears of a recession and expectations of a 0.5% interest rate cut by the Fed%. A series of weak earnings reports from major technology companies and increased concerns about the Chinese economy have also worsened investor sentiment.

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 0.38% to 102.82 (the lowest value since March 14). On Friday, the index fell 1.2% as a weaker-than-expected employment report for July raised expectations that the Federal Reserve would cut interest rates by 50 basis points in September as the economy worsens. According to the CME FedWatch Tool, markets see a 96.5% probability of a 0.5% rate cut in September, and a 75.9% probability of another 0.5% rate cut in November. Overall, futures impose 155 basis points of cuts this year, with a similar amount in 2025.

The yen has risen by about 14% against the dollar over the past three weeks, mainly due to a sharper than expected rate hike by the Bank of Japan - by 0.15% to 0.25%. Meanwhile, analysts said that the yen was the most overbought among G10 majors, and therefore the bar for yet more outperformance in the near term appears high.

Market participants also continue to monitor developments in the Middle East. The media reported that the US armed forces are sending additional forces to the Middle East and Europe after threats from Iran and its allies in response to the assassination of the Hamas leader.