© Reuters. Japanese yen banknotes are seen in this illustration photo taken on June 15, 2022. REUTERS/Florence Lu/Illustration
A look at the coming day in the European and international markets from Tom Westbrook
A day of calm after the bond market liquidated last week and investors are back in trading near-term interest rate expectations.
Traders in Asia pushed both yields and the dollar lower on Tuesday, with focus on US inflation data on Wednesday.
The two- and ten-year Treasury yields are back below 5% and 4%, respectively.
News with the help of stocks, with Ali Baba (NYSE:) is extending its gains on hopes that the $984 million fine on Ant Group will signal the end of a years-long campaign that has battered China’s tech sector.
US Treasury Secretary Janet Yellen’s visit to Beijing also seemed to meet lowered expectations, with few signs that strained relations are improving but also few signs that they are getting worse.
The yen is in the driving seat of foreign exchange markets, as investors back away from high-yield bets in emerging markets funded by cheaply borrowing yen.
Such trades are placed by selling the yen for the dollar and then the dollar for emerging market currencies such as the peso or the riyal, so reversing them requires selling the dollar for the yen. The yen rose to a strong side of 141 against the dollar for the first time in three weeks.
Elsewhere in Asia, developers in Hong Kong have been helped by an extension of the support package for the Chinese real estate sector. It increased by 1.5%.
The calendar of events is relatively empty until US CPI data on Wednesday and US earnings later in the week, although German final inflation data and UK jobs data will be released later on Tuesday.
Economists expect the UK unemployment rate to remain at 3.8%, which is likely to add upward pressure on wages and interest rates.
This appears to be providing speculative support for the British currency, with long positions in sterling nearing five-year highs and the spot touching a 15-month high in the Asian trading session.
Key developments that may affect the markets on Tuesday:
British jobs data
German final consumer price index