Asian session review: the US dollar is showing positive dynamics

During today's Asian trading, the US dollar rose slightly against major currencies as recent statements by Fed policymakers increased the likelihood of keeping interest rates at a high level for a longer time. Investors also cautiously followed the negotiations on raising the US debt ceiling. Yesterday, President Joe Biden and House Speaker Kevin McCarthy ended talks without reaching an agreement. However, they will continue their negotiations, just 10 days before a possible default.

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 0.10% to 103.27.

Yesterday, the president of the Federal Reserve Bank of Minneapolis, Neel Kashkari, said that the question of whether to raise rates or put the tightening process on pause at the July meeting remains open. He also noted that inflation in the service sector remains fairly stable, and the Fed may have to raise rates above 6% to return it to the Fed's target of 2%. In turn, the president of the St. Louis Fed, James Bullard, said that, in his opinion, two more rate hikes are needed this year. He added that the Fed's approval of the decision to suspend rate hikes at the June meeting would not mean a complete stop to the tightening cycle. After these statements, the chances of another Fed rate hike by 25 basis points next month increased again. Money markets also scaled back expectations of Fed rate cuts later this year, with rates seen holding above 4.7% by December.

The yuan fell 0.2% against the US dollar, returning to a five-month low. Yesterday, the Central Bank of China kept its benchmark lending rates unchanged, as a weakening yuan and widening yield differences with the US limited the scope for any substantial monetary easing to shore up the country's post-COVID economic recovery.