The dollar fell on expectations that a key US inflation report will show price gains slowing, eroding the case for more rate hikes. Hong Kong stocks rose after data showed a strong credit expansion in the world’s second-largest economy.
(Bloomberg) — The dollar fell on expectations that a key US inflation report will show price gains slowing, eroding the case for more rate hikes. Hong Kong stocks rose after data showed a strong credit expansion in the world’s second-largest economy.
Across Asia, shares were a mixed bag, with slides in Japan and increases in Australia and India. Chinese tech firms gained for a third day as unusual praise from the nation’s top economic planner and news of a meeting between officials and key companies stoked optimism over policy support for the sector.
In contrast to the gains in Hong Kong, China’s domestic benchmark CSI 300 index shed 0.4%, an indication that local investors would like to see stronger stimulus to salvage an ailing economy. European stock futures edged higher while their US counterparts were little changed.
A dollar gauge dropped to the lowest since April and Treasury yields steadied.
The greenback’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.
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.
The kiwi dollar advanced after initially paring gains on the Reserve Bank of New Zealand’s decision to keep interest rates unchanged for the first time in almost two years. The nation’s sovereign bond yields declined.
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 Co., said on Bloomberg Television. “The soft landing scenario is not one that we at Pimco really adapt to in the short term.”
In commodities, 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 6:28 a.m. London time. The S&P 500 rose 0.7%
- Nasdaq 100 futures rose 0.1. The Nasdaq 100 rose 0.5%
- Euro Stoxx 50 futures rose 0.4%
- Japan’s Topix index fell 0.4%
- Hong Kong’s Hang Seng Index rose 1%
- China’s Shanghai Composite Index fell 0.4%
- 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 $1.1031
- The Japanese yen rose 0.6% to 139.54 per dollar
- The offshore yuan rose 0.3% to 7.1911 per dollar
- The Australian dollar rose 0.4% to $0.6711
- The British pound rose 0.2% to $1.2957
Cryptocurrencies
- Bitcoin rose 0.2% to $30,631.22
- Ether rose 0.5% to $1,883.14
Bonds
- The yield on 10-year Treasuries was little changed at 3.96%
- Japan’s 10-year yield advanced two basis points to 0.470%
- Australia’s 10-year yield declined three basis points to 4.15%
Commodities
- West Texas Intermediate crude was little changed
- Spot gold rose 0.4% to $1,939.03 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Matthew Burgess, Michael G. Wilson and Yumi Teso.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.