During today's Asian trading, the US dollar declined slightly against major currencies, while investor demand for risky assets increased after Iran's foreign minister flagged the Israel-Hamas conflict could be moving closer to a diplomatic solution. However, trading activity was low, as most of the region including China, Hong Kong, Japan, South Korea, Singapore, Taiwan, Vietnam and Malaysia are closed for holidays.
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 0.12% to 103.98. The prospects for the Fed's monetary policy continue to be in the focus of investors' attention. On Friday, the president of the Federal Reserve Bank of Dallas, Lorie Logan, said that she had no interest in recommending an interest rate cut, adding to the chorus on further reining in inflation. Later today, Fed Board Governor Michelle Bowman, Federal Reserve Bank of Richmond President Thomas Barkin and Federal Reserve Bank of Minneapolis President Neel Kashkari will deliver speeches. Meanwhile, January data on the US CPI will be published tomorrow, which will help assess the Fed's progress in reducing inflation. According to forecasts, inflation continued to decline in January - the consumer price index probably increased by 0.2% for the month and by 3% per annum. Falling gasoline prices and weaker grocery store price increases should hold back overall growth. Core inflation is likely to have increased by 0.3% on a monthly basis and by 3.7% per annum. Ultimately, experts expect a further decline in inflation this year, albeit at a slower pace than in 2023, and believe that price increases are more likely to slightly exceed the Fed's target rather than fall below it. Inflation data will continue to attract the Fed's main attention this year as it tries to pinpoint the timing of rate cuts. According to the CME FedWatch Tool, markets see a 17.5% probability of a 25 basis point rate cut at the Fed meeting in March and a 63.3% probability of a rate cut in May, with 115 basis points of cuts priced in for this year.
The New Zealand dollar fell 0.15% against the US dollar, while traders looked ahead to a Reserve Bank of New Zealand Governor Adrian Orr speech that could make or break market bets for another hike. Markets moved to price in a 44% chance that the RBNZ would hike rates to 5.75% when it meets on Feb. 28. A rise in May is seen at a 72% probability.