During today's Asian trading, the US dollar declined slightly against major currencies after strong gains yesterday, driven by rising US bond yields and investor risk aversion. Trading was thinned in Asia with Japan out on a holiday.
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 0.07% to 102.12. Yesterday, the index jumped 0.81%, recording its biggest gain since March 2023 and reaching its highest level since December 21. The risk aversion caused the S&P 500 and Nasdaq to close their first trading session of 2024 lower. The risk-off mood was also in part driven by concerns over escalating geopolitical tensions, after Israel killed Hamas deputy leader Saleh al-Arouri in a drone strike in Beirut.
The yen fell 0.3% against the US dollar after yesterday's 0.79% decline. Investors are preparing for the publication of the minutes of the Fed's December meeting (at 19:00 GMT), at which policymakers signaled an end to their aggressive monetary tightening campaign. It is expected that a number of data on the labor market, which will be published later this week, will emphasize that the labor market remains resilient, although it is gradually cooling. According to the CME FedWatch Tool, markets see a 67.2% probability of a 25 basis point rate cut at the Fed meeting in March 2024 and a 97.9% probability of a rate cut in May 2024, with over 150 basis points of cuts priced in for this year.