Asian session review: the US dollar is showing positive dynamics

During today's Asian trading, the US dollar rose moderately against major currencies amid continued uncertainty about Donald Trump's tariff plans.

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 0.15% to 108.11. Yesterday, Trump announced that his administration is discussing the introduction of 10 percent duties on imported goods from China, from February 1st. Earlier, he noted that from February 1, Mexico and Canada will also face duties of about 25%. He also promised to impose duties on European imports, without providing additional details. Meanwhile, experts said that although Trump threatened tariffs of up to 25% on Mexico and Canada, he refrained from imposing them, despite signing several executive orders. Overall, his decision not to target China is seen as a possible sign of a more cautious approach to tariffs than was promised during his election campaign, reducing inflation risks and potential hawkish actions by the Federal Reserve. Traders expect the Fed to cut interest rates by 0.25% by July, while the probability of another rate cut by the end of the year is about 50%. According to the CME FedWatch Tool, markets see a 0.5% probability of a 0.25% rate cut in January (compared to 2.1% a week ago).

The New Zealand dollar declined by 0.3% against the US dollar on the back of New Zealand inflation data. Statistics New Zealand said that CPI rose 2.2% on year in the fourth quarter of 2024. That was unchanged from the previous quarter but was higher than expectations for 2.1%. On a quarterly basis, inflation rose 0.5% - in line with forecasts and slowing from 0.6% in Q3. Inflation for tradeable items rose 0.3% q/q but fell 1.1% on year, while non-tradeable items climbed 0.7% q/q and 4.5% on year. Traders currently see a 65% chance that the RBNZ will cut rates by 0.5% at its next meeting in February.