Asian session review: US dollar is showing negative dynamics

During today's Asian trading, the US dollar declined slightly against major currencies, retreating from the 2-week high reached yesterday, while investors were cautious amid yesterday's collapse of the US stock market and big losses for Asian stocks.

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 0.13% to 101.69. Pressure on the dollar was exerted by soft U.S. manufacturing data, which fanned worries about a hard landing for the world's biggest economy. This data comes ahead of a key US jobs report on Friday that could impact market expectations about the timing and extent of interest rate cuts by the Federal Reserve. According to forecasts, the nonfarm payrolls rose by 160 thousand in August after an increase of 114 thousand in July, the unemployment rate fell to 4.2% from 4.3%, and annual wage growth accelerated to 3.7% from 3.6%. If the data remains robust, a 0.25% cut is more likely, but if employment grows by less than 130,000 and the unemployment rate rises again, the probability of a 0.5% rate cut will increase. According to the CME FedWatch Tool, markets see a 41% probability of a 0.5% rate cut in September (up from 38% the week before), and a 59% probability of a 0.25% rate cut (down from 62% the week before), with a 1% rate cut expected by the end of the year.

The yen rose by 0.25% against the US dollar, continuing yesterday's rally (+0.97%), which was due to increased demand for safe haven assets, as well as statements by the head of the Bank of Japan, who repeated yesterday that the central bank will continue to raise interest rates if the economy and inflation develop as policymakers currently expect. The Japanese yen has gained 10% over the past two months, helped in part by the intervention of the Japanese government.