Asian session review: the US dollar is showing negative dynamics

During today's Asian trading, the US dollar fell against major currencies, continuing yesterday's decline and reaching a one-week low, which was caused by an increased likelihood of a big interest rate cut by the Fed at the September meeting.

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 0.18% to 101.19, as yesterday's labor market data and media reports from the Financial Times and the Wall The Street Journal that said the Fed's decision would be a close call, forced investors to reconsider their expectations regarding the results of the next Fed meeting. According to the CME FedWatch Tool, markets see a 43% probability of a 0.5% rate cut in September (up from 30% the week before), and a 57% probability of a 0.25% rate cut (down from 70% the week before), with a 1.16% rate cut expected by the end of the year. Today, market participants will focus on U.S. import price data for August, as well as the Reuters/Michigan consumer sentiment index for September, especially the details of the report related to consumer inflation expectations. Economists expect the consumer sentiment index to rise to 68.0 from 67.9 in August, while annual inflation expectations remained at 2.8%.

The yen rose 0.4% against the US dollar, once again reaching its 2024 high, driven by falling US bond yields and overall weakness in the US currency. Investors are also gradually preparing for the meeting of the Bank of Japan, which will be held next Friday. Meanwhile, Naoki Tamura, a member of the board of the Bank of Japan, said that the Central Bank should raise rates to at least 1% in the second half of the next financial year, but added that it would most likely raise rates slowly and in several stages.