Asian session review: the US dollar is showing negative dynamics

During today's Asian trading, the US dollar declined slightly against major currencies, while market participants continued to analyze statements by Fed policymakers, as well as prepare for the publication of US data that may help clarify the timing of monetary policy easing.

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 0.05% to 104.00. Yesterday, the index fell by 0.15%, as Fed policymakers named a number of reasons why they don't feel much need to start lowering interest rates anytime soon or act quickly once they begin the policy easing process. According to the CME FedWatch Tool, markets see a 18.5% probability of a 25 basis point rate cut at the Fed meeting in March and a 66.2% probability of a rate cut in May, with 115 basis points of cuts priced in for this year. Gradually, the focus of investors' attention is shifting to the January US CPI data, which will be published next Tuesday. Economists expect price growth to accelerate to 0.3% m/m from 0.2% m/m in December, while core inflation rose again by 0.3% m/m.

The yen fell by 0.35% against the US dollar, reacting to statements by Bank of Japan Deputy Governor Shinichi Uchida. He said that the Central Bank is unlikely to aggressively raise interest rates, even after they move into positive territory (now the rate is at -0.1%). "If sustainable and stable achievement of the 2% inflation target comes into sight, our large-scale monetary easing will have fulfilled its role and we'll explore whether it should be revised. Regardless of the timing of policy revision, we need to devise both communication and market operation steps to avoid creating discontinuity in financial markets," Uchida said.