Asian session review: the US dollar stabilized against major currencies

During today's Asian trading, the US dollar consolidated against major currencies, but remained near its lowest level since August 1 and was preparing to record the largest weekly drop since July amid increased expectations of monetary policy easing next year.

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 0.04% to 101.99. Yesterday, the index fell by 0.89%, and has lost 1.93% since the beginning of the week. The main pressure on the currency was exerted by the results of the Fed meeting and statements by Central Bank Chairman Powell that the tightening of monetary policy is likely to be completed, with a discussion of cuts coming "into view". According to the CME FedWatch Tool, markets see a 61.1% probability of a 25 basis point rate cut at the Fed meeting in March 2024 and a 94.5% probability of a rate cut in May 2024.

The euro and the pound also consolidated against the US dollar after rising by more than 1% yesterday amid hawkish stances from the ECB and Bank of England. Yesterday the European Central Bank left its policy parameters unchanged and opposed the imminent cut in interest rates. The Bank of England also left interest rates unchanged and said rates should remain high for an "extended period."

The yen rose 0.05% against the US dollar, and is now trading near its highest level since July 31, while investors prepare for the meeting of the Bank of Japan, which will be held next week. Since the beginning of the week, the yen has risen by about 2% and is on track for its fifth straight week of gains against the dollar. The last time it went on a similar run was during the pandemic in mid-2020.