The US dollar index rose sharply once again amid cautious sentiment in global equity markets and hawkish comments from Fed Chairwoman Loretta Mester. The US currency significantly increased against G6 currencies in Asian trading. The greenback traded within a range of 104.0-104.5.

Meanwhile, two-thirds of the market believes that the Fed will increase the key rate by another 25 basis points in June. Strong US economic data support their expectations. For example, consumer spending and durable goods orders rose more than expected in April.

These and other reports confirm that the US economy remains resilient despite the Fed's continued efforts to raise rates. Against this backdrop, the greenback looks even better against its basket counterparts and is on track to gain almost 3% in May. The US dollar closed Wednesday's Asian session at 104.5.

Dollar bulls seem to be more optimistic about the future, believing that the US authorities will somehow avoid a default and allow the Fed to keep rates high. At the same time, the Bank of Japan continues to maintain its ultra-loose policy until inflation reaches the 2% target.

Japanese authorities say they are keeping a close eye on the yen. Japan's vice minister of finance for international affairs Masato Kanda said today that "currency rates should move stably reflecting fundamentals and excessive volatility is undesirable."

The markets have a vivid memory of Japan's intervention in the currency market after such statements. As a rule, a simple statement was enough to affect the yen. Today, it appears to be the case again.

The Japanese currency managed to stop falling against the US dollar. The pair retreated from the highs of November 2022 to 139.6. The yen was trading in the range of 139.1-139.9 in the Asian session.

Support levels of the dollar/yen pair have shifted to 139.4 and 137.9. In the current macroeconomic environment, yesterday's high just below 142 looks unreachable.

The Australian dollar also retreated from yesterday's highs. During the Asian session, the pair fell in the 0.6474-0.6540 range under pressure from several factors.

On top of the mixed results from Wall Street, weak economic data from China and worrying expectations about the outcome of the US debt talks weighed on the aussie today. The currency plunged below 0.6480, ignoring an increase in domestic inflation.

Oil prices also failed to provide support for the Australian dollar. Today, crude stabilized in anticipation of news from Washington on the national debt, after falling by more than 4% in the previous session. However, weak data from China - the world's largest importer of crude and Australia's main trading partner - held back gains.

China is also one of New Zealand's leading trading partners. Therefore, a slowdown in China's economy affects the New Zealand dollar. It was trading lower against the US dollar in the range of 0.5995 - 0.6052 in early Wednesday trading.

In the Asian session, the kiwi broke through the support level of 0.6000, showing its lowest level in the last six months. The currency is about to post a monthly drop of almost 3% in May. The next support levels for the New Zealand currency are located at 0.5984, the low of November 11, and 0.5941, the low of November 2.

00:00 Intro
00:34 US
01:28 JAPAN INDUSTRIAL PRODUCTION
01:42 JAPAN RETAIL SALES
02:03 CHINA MANUFACTURING PMI
02:43 USDX
03:54 USD/JPY
05:34 AUD/USD
06:34 NZD/USD

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