The US Dollar Index rebounded this week and is expected to end two consecutive weeks of decline

According to Zhitong Finance, the US dollar held steady on Friday, poised to end two consecutive weeks of decline as traders began to reassess the extent of the Fed's interest rate cuts this year. The US Dollar Index, which measures the dollar against six major currencies, was reported at 104.21, higher than the four-month low of 103.64 touched on Wednesday. After two weeks of decline, the index is expected to rise by 0.16% this week.

In terms of major currencies, data released on Friday showed that Japan's core CPI rose for the second consecutive month in June, fueling market expectations of a possible rate hike by the Bank of Japan. In March this year, the Bank of Japan exited negative interest rates and bond yield controls, ending a 10-year aggressive stimulus program, leading to increased speculation of a rate hike at the end of the month. Traders currently estimate a 41% chance of a 10 basis point rate hike in July.

Due to the large interest rate differential between the US and Japan, the yen has fallen by over 10% against the dollar this year, hovering near a 38-year low earlier this month, raising doubts about possible actions by the Japanese government. According to Bank of Japan data, the yen rate fluctuated to 157.24 after hitting a six-week high of 155.375 on Thursday. Last week, the Japanese government reportedly intervened in the foreign exchange market, with intervention possibly close to 6 trillion yen.

In the US, initial jobless claims increased more than expected last week, but there was no substantial change in the job market. The Federal Reserve is scheduled to hold a meeting at the end of July, with market expectations of a very low probability of a rate cut. However, traders have fully priced in the expectation of a 25 basis point rate cut at the Fed's September meeting.

Ryan Brandham, Head of Global Capital Markets at Validus Risk Management North America, said the US economy is getting closer to the right time for a rate cut. He said, "But the Fed's cautious attitude and slow action may be reasonable, as they are concerned about reigniting inflation, and they have been working to control inflation."

Mary Daly, President of the Federal Reserve Bank of San Francisco, said on Thursday that she is looking for more confidence that inflation is returning to the Fed's 2% target level before calling for a rate cut. Daly said, "We have not reached the inflation target yet."

In early Asian trading, the euro was little changed against the dollar at 1.0893, down 0.4% from the previous trading day, as the European Central Bank kept rates unchanged and did not reveal its next steps. The euro hit a four-month high of 1.0947 against the dollar on Wednesday, recovering all lost ground in recent weeks, when the euro was pressured by uncertainty surrounding the French elections.

The currency market expects the Fed to cut rates more than twice by the end of the year, while the ECB will cut rates less than twice, so the euro may dominate the remaining time this year.

Following data showing a slowdown in UK wage growth, the pound held steady against the dollar at 1.2942 after falling 0.5% in the previous trading day, but remained strong, keeping doubts about a rate cut by the Bank of England. The pound hit a one-year high against the dollar on Wednesday, rising 1.7% year-to-date In other currency news, the Australian dollar fell by 0.11% to 1 Australian dollar to 0.66985 US dollars, while the New Zealand dollar dropped by 0.22% to 1 New Zealand dollar to 0.6032 US dollars