Asian session review: the US dollar is showing a slight decline

During today's Asian trading, the US dollar fell slightly against major currencies, but is preparing to record a second weekly increase in a row amid weakening expectations of Fed monetary easing in the near future.

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 0.11% to 103.42. Since the beginning of the week, the index has increased by 0.98%, as stronger-than-expected US data provided Fed policymakers additional arguments to maintain a hawkish tone. Yesterday, the president of the Federal Reserve Bank of Atlanta, Rafael Bostic, said that the Fed is not yet ready to move to easing monetary policy, adding that he expects the first rate cut to occur only in the third quarter. Bostic noted that he is ready to start cutting rates earlier if price growth slows down much faster than he expects, but stressed that he wants to see more evidence that inflation remains on a trajectory leading to the 2% target. According to the CME FedWatch Tool, markets see a 53.8% probability of a 25 basis point rate cut at the Fed meeting in March and a 92.5% probability of a rate cut in May, with 150 basis points of cuts priced in for this year.

The yen fell 0.1% against the US dollar, while investors analyzed Japanese inflation data, which showed that in December core inflation slowed to 2.3% per annum, its lowest annual pace since June 2022. Overall CPI increased by 2.6% per annum, in line with expectations and down from 2.8% per annum in November. The December reading touched an 18-month low, although it remains above the Bank of Japan's target of 2%.