During today's Asian trading, the US dollar declined moderately against major currencies amid partial profit-taking after the recent rally caused by the escalation of the conflict in the Middle East and a decrease in the likelihood of easing the Fed's monetary policy.
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 0.15% to 105.88. Last week, the index rose by 1.6%, recording the most significant increase since September 2022 as the latest US economic data forced the market to reconsider expectations of a Fed rate cut. According to the CME FedWatch Tool, markets see a 20.2% probability of a 25 basis point rate cut at the Fed meeting in June, and a 51.3% probability of a rate cut in July (compared to 69.6% a week earlier). In addition, the markets now forecast a rate cut of only 40 basis points in 2024, which implies approximately two rate cuts of 0.25%, compared with three cuts predicted just a month ago. Experts said that this week investors' main focus will be on Fedspeak where more than a dozen voting members on the FOMC are likely to emphasize patience after last week's CPI print.
The euro rose 0.1% against the US dollar, but remained near a 5-month low amid increasing divergence in policy between the Fed and the ECB, which last week made it clear that it could start cutting rates as early as June.
The yen fell by 0.35% against the US dollar, updating its 34-year low, despite the threat of intervention in the foreign exchange market. Japanese Finance Minister Shunichi Suzuki said he was closely monitoring the movement of the currency and that Tokyo was "fully prepared" to act.