Asian session review: the US dollar is showing negative dynamics

During today's Asian trading, the US dollar declined slightly against major currencies, but remained near a 5-week high. Demand for the US dollar, seen as a safe haven asset, was supported by concerns about inflation in the US and the growth of the global economy, as well as uncertainty about raising the US debt ceiling. However, the growth of the US currency was restrained by expectations of easing of the Fed's monetary policy later this 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) fell by 0.05% to 102.62. On Friday, the index rose 0.6% on the back of a report that showed that consumer sentiment in the US fell to a six-month low in May, reinforcing bearish sentiment due to Congressional negotiations on US public finances. The preliminary consumer sentiment index from the University of Michigan fell to 57.7 in May from 63.5 in April, which was much lower than expected (63.0). The current conditions index fell to 64.5 in May from 68.2 in April, while the expectations index fell to 53.4 from 60.5. Respondents estimated annual inflation expectations at 4.5% compared to 4.6% in April, while five-year inflation expectations rose to 3.2% from 3%, which is the highest level since 2011.

Later this week, investors will be scrutinizing a new batch of U.S. data for clues on the outlook for rates, including retail sales and industrial production data.

The Chinese yuan rose 0.1% against the US dollar, ahead of tomorrow's publication of data on retail sales, industrial production and investment in fixed assets. Meanwhile, today the People's Bank of China kept its seven-day reverse repo rate unchanged at 2%.