During today's Asian trading, the US dollar consolidated against major currencies amid a lack of new catalysts and low trading activity during the holiday period.
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 0.02% to 108.02. Last week, the index added 0.35%, recording the 4th consecutive weekly increase, helped by expectations Donald Trump's policies of looser regulation, tax cuts, tariff hikes and tighter immigration will be both pro-growth and inflationary and keep U.S. yields elevated. Expectations that the Fed would cut interest rates at a slower pace next year also supported the US dollar. After the December meeting, Fed Chairman Jerome Powell said that the Central Bank "will be careful about further rate cuts." According to the CME FedWatch Tool, markets see a 11.2% probability of a 0.25% rate cut in January (compared to 6.4% a week ago), while the probability of an additional rate cut in March is 46.9%.
The Japanese yen was trading steadily against the US dollar, remaining near a 5-month low amid thin year-end liquidity. Overall, recent policy statements have reduced the likelihood of further monetary policy tightening by the Bank of Japan. At its December meeting, the central bank kept interest rates at 0.25%, and bank governor Kazuo Ueda said the central bank was scrutinizing more data on next year's wage momentum and clarity on the incoming U.S. administration's economic policies. Traders are also closely watching for any signs of intervention by Japanese officials to support the currency if it continues to weaken.