Asian session review: the US dollar is showing positive dynamics

During today's Asian trading, the US dollar rose slightly against major currencies, continuing yesterday's rally caused by the publication of strong US data, which reduced the likelihood of easing the Fed's monetary policy at the June 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) rose by 0.12% to 105.09 (the highest value since November 14, 2023). The index gained 0.49% yesterday as the Institute for Supply Management (ISM) reported that the manufacturing index rose to 50.3 in March from 47.8 in February. The index exceeded 50 points, indicating an expansion in activity in the sector, for the first time in a year and a half, as production recovered and new orders increased, although factory employment remained low and commodity prices rose. The recovery put an end to a 16-month contract in manufacturing activity, which accounts for 10.4% of the economy. Overall, the latest data helped strengthen the opinion that the US Central Bank will not rush to reduce interest rates. According to the CME FedWatch Tool, markets see a 4.5% probability of a 25 basis point rate cut at the Fed meeting in May, and a 58.8% probability of a rate cut in June (compared to 70.2% a week earlier). In total, markets expect at least three Fed rate cuts of 25 basis points this year.

The yen consolidated against the US dollar, remaining near a 32-year low, as traders stood aside due to fears of intervention by Japanese officials. On Tuesday, Finance Minister Shunichi Suzuki reiterated that he wouldn't rule out any options to respond to disorderly currency moves. Experts note that the yen remains under pressure, despite the fact that last month the Bank of Japan raised interest rates for the first time since 2007, while officials are cautious about further tightening policy amid an unstable exit from decades of deflation.