The dollar fell ahead of a US inflation report that will help shape the Federal Reserve’s policy trajectory. Hong Kong stocks rose after data showed a strong credit expansion in the world’s second-largest economy.
(Bloomberg) — The dollar fell ahead of a US inflation report that will help shape the Federal Reserve’s policy trajectory. Hong Kong stocks rose after data showed a strong credit expansion in the world’s second-largest economy.
A dollar gauge declined to the lowest since April, while US stock futures were steady in Asia.
Across the region, stocks were a mixed bag, with increases in Australia and slides in both Tokyo and Seoul. In contrast to the gains in Hong Kong, China’s domestic benchmark CSI 300 index was flat, an indication that local investors would like to see stronger stimulus to salvage an ailing economy.
The dollar’s weakness comes as traders focus on US consumer price data due later Wednesday, with a Bloomberg survey showing expectations for both core and headline inflation to moderate. Also in the spotlight is the yen’s advancement beyond the key 140 level partly on speculation that the Bank of Japan will tweak policy later this month.
“Investors await for US CPI and PPI data and any confirmation of slowdown in inflationary pressure will probably accelerate the current trend of declines in the dollar,” said Takeshi Ishida, currency strategist at Resona Bank.
The New Zealand dollar rebounded after initially paring gains on news of the local central bank’s decision to keep interest rates unchanged for the first time in almost two years. The nation’s sovereign bond yields declined.
Elsewhere, the yen may strengthen toward 138.50 per dollar as short positions unwind amid expectations of a BOJ policy adjustment, according to Shoki Omori, chief desk strategist at Mizuho Securities. “If the BOJ doesn’t do anything, USD/JPY is back up to 142.”
The offshore yuan gained for a fifth day against the greenback, after China’s central bank extended support for the currency via a stronger-than-expected daily reference exchange rate.
Meanwhile in the US, after surging by a four-decade high in June 2022, CPI has pulled back steadily in the face of the Fed’s monetary policy onslaught. That slowdown has given support to risk appetite.
Some investors, however, choose to remain defensive.
“The potential is for us to stay here at these higher rates for longer and not necessarily embrace rate cuts as quickly as the market suspects over this point in time,” Jerome Schneider, head of short-term portfolio management and funding at Pacific Investment Management, said on Bloomberg Television. “The soft landing scenario is not one that we at Pimco really adapt to in the short term.”
Elsewhere, oil steadied Wednesday after rising amid indications that Russian crude production is dropping, signaling the market’s supply glut may be coming to an end. Gold rose.
Key events this week:
- Canada rate decision, Wednesday
- Bank of England Governor Andrew Bailey speaks, Wednesday
- US CPI, Wednesday
- Federal Reserve issues Beige Book, Wednesday
- Fed speakers include Neel Kashkari, Loretta Mester, Raphael Bostic, Wednesday
- China trade, Thursday
- Eurozone industrial production, Thursday
- US initial jobless claims, PPI, Thursday
- US University of Michigan consumer sentiment, Friday
- US banks kick off earnings, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures were little changed as of 12:35 p.m. Tokyo time. The S&P 500 rose 0.7%
- Nasdaq 100 futures rose 0.1. The Nasdaq 100 rose 0.5%
- Japan’s Topix index fell 0.4%
- Hong Kong’s Hang Seng Index rose 1.3%
- China’s Shanghai Composite Index fell 0.1%
- Australia’s S&P/ASX 200 Index rose 0.4%
Currencies
- The Bloomberg Dollar Spot Index fell 0.3%
- The euro rose 0.2% to $1.1029
- The Japanese yen rose 0.6% to 139.58 per dollar
- The offshore yuan rose 0.3% to 7.1908 per dollar
- The Australian dollar rose 0.7% to $0.6730
- The New Zealand dollar rose 0.5% to 0.6228
Cryptocurrencies
- Bitcoin rose 0.1% to $30,624.07
- Ether rose 0.5% to $1,882.33
Bonds
- The yield on 10-year Treasuries declined one basis point to 3.96%
- Japan’s 10-year yield advanced 1.5 basis points to 0.465%
- Australia’s 10-year yield declined three basis points to 4.15%
Commodities
- West Texas Intermediate crude rose 0.2% to $74.98 a barrel
- Spot gold rose 0.3% to $1,938.71 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Matthew Burgess, Michael G. Wilson and Yumi Teso.
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