Traders said that Asian macro funds are taking advantage of Thursday's dollar decline to buy, especially USD/JPY.

After the latest CPI data showed that US inflation cooled down, the Bloomberg Dollar Spot Index, which tracks the exchange rate of the US dollar against ten other currencies, fell to a one-month low, then rebounded during the intraday period, and continued to rise in early Friday trading. The US dollar fell below the 154 mark against the yen on Thursday and then rose.

Antony Foster (Antony Foster), head of foreign exchange spot trading at the Nomura International Group of Ten (G10), said that European investors also saw the weakening of the US dollar on Thursday as an opportunity to buy the US dollar against the yen, but the scale of the purchase was small.

The yen's rebound “feels like a return to the mean rather than a large amount of money driving it higher,” he said. Today (Friday) morning, we saw some USD/JPY buys from different accounts, around 154 or below, but on a very small scale.”

The yen has strengthened from the level of suspected intervention in recent weeks. During the Asian trading session on Friday, the dollar traded around 155.80 against the yen. The Bloomberg Dollar Spot Index rose 0.1%, narrowing the decline from Thursday's intraday low to around 0.4%.

Three Asian traders said that Asian short-term investment funds seem unwilling to establish short positions in the US dollar. They said that after the data showed that the US inflation data had cooled, the closing of long positions in the US dollar was not accompanied by new short bets.

Bloomberg Markets Live Correspondent and strategist Vassilis Karamanis (Vassilis Karamanis) also pointed out that the demand to prolong the dollar through options at the end of the curve shows that position rebalancing is the main driving force behind the recent Bloomberg Dollar Spot Index trend.

Until a week ago, investors were still long on the dollar in the spot market, at the front end of the curve; the Bloomberg Dollar Spot Index is currently trading at its lowest point in more than a month, but it is still higher than the April low.

The one-month risk reversal rate of the Bloomberg Dollar Spot Index was 23 basis points, half of April 30; however, the one-year risk reversal rate is in consolidation mode. Currently, it is 85 basis points, which is comparable to the average of the past year.

The Bloomberg Dollar Spot Index is in danger of falling below the 2024 upward trend as investors debate when the Federal Reserve is likely to cut interest rates. Although some Federal Reserve officials have taken some kind of countermeasure, suggesting that borrowing costs may remain high for a longer period of time, the market still expects the Fed to cut interest rates in September.

The Bloomberg Dollar Spot Index is at risk of falling below the 2024 upward trend

At the beginning of this year, investors predicted that the US dollar would fall, but due to the strong US economy, the inflation rate remained high, investors reconsidered the possibility that the Federal Reserve would not delay cutting interest rates. The dollar rose against all major currencies this year.