Asian session review: the US dollar is showing negative dynamics

During today's Asian trading, the US dollar fell slightly against major currencies, continuing yesterday's decline, and returning to a 14-month low reached on Wednesday.

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 0.14% to 100.47. The US dollar remains under pressure amid the latest decision of the Fed, which sharply cut interest rates. According to the CME FedWatch Tool, markets see a 57.1% probability of a 0.25% rate cut at the November meeting and a 50.1% probability of a 0.50% rate cut in December, with a 0.73% rate cut expected by the end of the year. The FOMC indicated through its “dot plot” the equivalent of 50 more basis points of cuts by the end of the year. In all, the dot plot shows the benchmark rate coming down about 2% beyond Wednesday’s move. The FOMC expects the long-run neutral rate to be around 2.9%.

The yen rose sharply against the US dollar against the background of the Bank of Japan's statement, but then returned to the opening level of the session. The Bank of Japan left the interest rate at 0.25%, but expressed optimism about growth and made it clear that it would be wise to further tighten monetary policy. The central bank confirmed that the economy is still on the path to a moderate recovery, but noted that inflation is slowing and is at the target level. The bank also highlighted the volatility of the yen as a factor that influenced its opinion. Meanwhile, Japanese inflation data showed that in August, the growth of the core CPI accelerated to 2.8% per annum from 2.7% per annum in July, while the overall CPI increased by 3% per annum after an increase of 2.8% per annum in July. Both indicators coincided with economists' expectations.