Wayne Cole
SYDNEY (Reuters) – Asian shares fell on Monday ahead of U.S. price data that investors hope will show a return to slowing inflation, while markets were wary of possible Japanese intervention as the dollar tested the 160-yen barrier.
Geopolitics also loomed large, with the first US presidential debate on Thursday and the first round of voting in France over the weekend.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.1% after hitting a two-year high last week. South Korean shares fell 0.5%.
and Nasdaq futures rose about 0.1%. Boeing (NYSE:) shares could come under pressure after Reuters reported that US prosecutors are recommending criminal charges against the plane maker.
fell 0.1% as the yen’s continued weakness puts pressure on the Bank of Japan to tighten policy despite mixed domestic data.
Minutes from the central bank’s latest policy meeting released Monday showed there was plenty of discussion about cutting bond purchases and raising rates.
Japan’s top currency official expressed disapproval of the yen’s latest slide, which sent the dollar to 159.87 on Friday.
The dollar traded slightly lower at 159.73, targeting the 160.17 level where Japan was thought to have spent about $60 billion buying the yen back in late April and early May.
Demand for carry trades, borrowing the yen at low rates to buy higher-yielding currencies, also sent the Australian and New Zealand dollars to 17-year highs against the yen.
Even the euro tested recent highs at 170.87 yen, despite being saddled with a series of weak manufacturing sector (PMI) surveys that left the euro stuck at $1.0688.
“The decline in Eurozone PMI in June raises some concern that the emerging rebound is being interrupted,” JPMorgan analysts wrote in a note.
“The sharpness of the decline is notable against the backdrop of the French elections, which were directly cited by companies as a reason for the slowdown.”
France’s far-right National Rally (RN) party and its allies led the country’s first round of elections with 35.5% of the vote, according to a poll published on Sunday.
US manufacturing surveys, by contrast, showed activity at a 26-month high in June, although price pressures have still eased significantly.
The latest development has increased interest in the personal consumption price index (PCE), which will be released on Friday. Annual growth in the Federal Reserve’s favorite benchmark index is expected to slow to 2.6% in May, its lowest level in more than three years.
Such a result would likely strengthen market bets on a Fed rate cut as soon as September, for which futures are currently priced at 65% prospect.
There are at least five Fed speakers on the Fed speaker list this week, including San Francisco Fed President Mary Daly and Fed Governors Lisa Cook and Michelle Bowman.
In commodity markets, gold felt the burden of a strong dollar and fell to $2,317 an ounce. [GOL/]
Oil prices also eased slightly after rising about 3% last week. [O/R]
the price fell 40 cents to $84.84 a barrel and lost 39 cents to $80.34 a barrel.