During today's Asian trading, the US dollar declined moderately against major currencies, almost offsetting yesterday's increase, while the yen rose markedly amid increased expectations that the Bank of Japan will end stimulus measures in the coming months.
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 0.21% to 103.40. Yesterday, the index rose by 0.28% and reached a 6-week high amid weakening expectations of a rate cut at the March Fed meeting. According to the CME FedWatch Tool, markets see a 50% probability of a 25 basis point rate cut at the Fed meeting in March and a 86.5% probability of a rate cut in May. In 2024, futures traders now expect five rate cuts of 25 bps, although two weeks ago they expected six cuts. However, these expectations may change after the publication of two important economic indicators - the preliminary estimate of US GDP for the fourth quarter (on Thursday), as well as the core personal consumption expenditure (PCE) price index (on Friday).
The yen rose 0.4% against the US dollar, helped by an increase in Japanese government bond yields to a six-week high amid yesterday's statements by the head of the Bank of Japan, who said that the prospects for achieving the Bank of Japan's inflation target are gradually increasing. Overall, Ueda's statements gave the market a little more confidence that April is definitely the real date for a potential exit from the current policy.
The New Zealand dollar rose by 0.15% against the US dollar, while investors analyzed New Zealand inflation data. Statistics New Zealand said that in the 4th quarter, the CPI increased by 0.5% QoQ, as expected, after an increase of 1.8% QoQ in the 3rd quarter. In annual terms, the growth of consumer inflation slowed to 4.7% (the lowest value since the 2nd quarter of 2021) from 5.6% in the 3rd quarter. The latest change coincided with economists' forecasts. But although inflation continues to approach the central bank's target range (1%-3%), it remains very high.