The US dollar today experienced stagnation due to uncertainty regarding US interest rates, while the yen strengthened after Japan's core consumer price growth increased, raising speculation that the Bank of Japan would soon halt its monetary stimulus.

With US markets closed on Thursday for Thanksgiving celebrations and a shortened trading session on Friday, currencies are likely to trade within a narrow range, although potential volatility may remain as liquidity is expected to stay thin.

The DXY, which measures the US currency against six other currencies, fell by 0.058% to 103.71, remaining close to a two-and-a-half-month low of 103.17 reached earlier this week.

The index's decline reached 2.8% this month, putting it on track for the weakest monthly performance in the past year as hopes rise that the Fed will raise interest rates and may start reducing rates next year.

Markets now have lower expectations regarding the possibility of rate cuts by the Fed in 2024. According to CME Group's FedWatch tool, futures contracts currently show a 26% probability that the Fed will cut its target rate at the March 2024 policy meeting, down from a 33% probability the previous week.

Meanwhile, Japan's core consumer price growth saw a slight increase in October after a decline the previous month. This reinforces investors' views that high inflation may prompt the Bank of Japan (BOJ) to soon end its monetary stimulus.

Economists from ING express confidence that the BOJ is likely to change its highly accommodative policy next year.

"We believe the BOJ could stop its yield curve control program in the first quarter of next year, given that Japanese government bonds appear to have stabilized... and then begin its first rate hike in the second quarter of 2024 if wage growth continues to improve next year."

The national Core Consumer Price Index (CPI), which excludes volatile fresh food costs, rose by 2.9% year-on-year in October, according to government data released on Friday. This figure is slightly below economists' estimates in a Reuters poll of 3.0%.

The Japanese yen (USDJPY) strengthened by 0.21% to 149.23 per dollar. Asian currencies are slowly beginning to move away from their lowest levels in 33 years at 151.92 that occurred earlier last week, with a 1.5% increase during the month.

In November, factory activity in Japan fell for the sixth consecutive time, while growth in the services sector saw little change, according to business survey results released on Friday. This highlights the fragility of the Japanese economy due to weak demand and inflation.

The euro (EURUSD) stood at $1.09065, up 0.16% after a series of preliminary surveys indicated that the recession in Germany may be shallower than expected. This increase offsets the gloomy readings related to business activity in France.

Sterling (GBPUSD) was last at $1.254, up 0.06% on the day.

The Australian dollar (AUDUSD) rose 0.11% to $0.656, while the kiwi (NZDUSD) increased by 0.15% to $0.606.

Treasury bonds continued trading in Asia after Japan's holiday on Thursday, with the yield on 10-year Treasury bonds (US10Y) rising by 4.3 basis points to 4.459%. The yield on 30-year Treasury bonds (US30YT=RR) also increased by 3.6 basis points to 4.584%.

Also Read:

U.S. Dollar Falls to One-Year Low at 100.78

U.S. Dollar Pressured by Weak Economic Data

 

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