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Japan officials jawbone as dollar nears 160 yen
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Fed's favoured inflation index looms large this week
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US Presidential debate, French elections on horizon
(Updates prices at 1145 GMT)
By Wayne Cole and Amanda Cooper
SYDNEY/LONDON, June 24 (Reuters) - Global shares
steadied on Monday ahead of U.S. price data that investors are
banking on to show a renewed moderation in inflation, while
markets were on alert for Japanese intervention as the dollar
tested the 160-yen barrier.
Geopolitics also loomed large, with the first U.S.
presidential debate on Thursday and the first round of voting in
the French election at the weekend.
The MSCI All-World index rose 0.1% on the
day, having fallen for the previous two sessions. In Europe, the
STOXX 600 gained 0.5%, while U.S. index futures
were up 0.1%.
Japan's Nikkei closed up 0.5%, with the continued
decline in the yen putting pressure on the Bank of Japan to
tighten policy despite patchy domestic data.
Minutes of the central bank's last policy meeting out on
Monday showed there was much discussion about tapering its bond
buying and raising rates.
Japan's top currency official Masato Kanda was out early to
voice disapproval with the yen's latest drop which saw the
dollar reach as high as 159.94.
The dollar was trading just a shade softer at 159.74, eyeing
the 160.245 peak from late April where Japan is thought to have
started spending around $60 billion buying the yen.
Demand for carry trades - borrowing yen at low rates to buy
higher yielding currencies - has also seen both the Australian
and New Zealand dollars reach 17-year peaks on the yen.
"Fresh cyclical highs for the dollar versus the yen
overnight, further intervention jawboning from Japan's FX
supremo Kanda and continued pressure on the yuan underline the
pain being felt in Asia and EM more broadly from the Fed's high
for longer stance, and will probably revive 'currency wars'
chatter," Marc Ostwald, chief global economist at ADM Investor
Services.
PARSING THE PCE
Even the euro was testing recent highs at 170.87 yen
, despite being saddled with a round of soft
manufacturing surveys (PMI). The euro is heading for a drop of
1.2% in June, its largest monthly decline since January. But on
Monday, it was trading up 0.3% on the day at $1.0728.
"The decline in the euro area flash June PMI raises some
concern that the nascent rebound is being cut short," analysts
at JPMorgan wrote in a note.
"The abruptness of the drop is notable against the backdrop
of the French election, which was mentioned explicitly by firms
as a reason for the drag."
France's far-right National Rally (RN) party and its allies
were seen leading the first round of the country's elections
with 35.5% of the vote, according to a poll published on Sunday.
Manufacturing surveys from the United States, in contrast,
showed activity at a 26-month high in June, though price
pressures subsided considerably.
The latter shift whetted appetites for the personal
consumption expenditures (PCE) price index due on Friday. Annual
growth in the Federal Reserve's favoured core index is expected
to slow to 2.6% in May, the lowest in more than three years.
"Note that low PCE deflator outcomes are needed to keep the
y/y rate from rising through the course of this year given the
string of low prints in the second half of 2023," cautioned
analysts at NAB.
A low result would probably reinforce market bets on a Fed
rate cut as early as September, which futures currently price as
a 65% prospect.
There are at least five Fed speakers on the docket this
week, including San Francisco Fed President Mary Daly and Fed
Governors Lisa Cook and Michelle Bowman.
In commodity markets, gold pared losses in line with the
retreat in the dollar to trade up 0.3% at $2,327 an ounce, while
oil rose, pushing Brent crude up 0.4% to $85.57 a barrel
and U.S. crude also up 0.4% at $81.00.
(Additional reporting by Wayne Cole in Sydney; editing by
Muralikumar Anantharaman, Mark Heinrich and Sharon Singleton)