By Wayne Cole
SYDNEY (Reuters) – Asian shares fell on Monday as the countdown to U.S. price data investors hope will show a renewed moderation in inflation, while markets were on alert for possible Japanese intervention with the dollar testing the 160 yen barrier.
Geopolitics was also looming, with the first US presidential debate on Thursday and the first round of voting in the French election at 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 stocks fell by 0.5%.
Nasdaq futures rose by about 0.1%. Boeing (NYSE:) shares may face pressure after Reuters reported that US prosecutors recommended criminal charges against the plane maker.
The index fell 0.1%, with the continued decline of the yen, which pressures the Bank of Japan to tighten its policy despite unstable local data.
Minutes from the central bank’s latest policy meeting on Monday showed there was a lot of discussion about tapering its bond-buying program and raising interest rates.
Japan’s top currency official came out early to express his disapproval of the yen’s recent decline, which took the dollar to 159.87 on Friday.
The dollar was trading slightly lower at 159.73, looking at the 160.17 level at which Japan is believed to have spent about $60 billion buying the yen in late April and early May.
Demand for carry trades, borrowing the yen at low interest rates to buy higher-yielding currencies, has also seen the Australian and New Zealand dollars reach 17-year highs against the yen.
Even the euro tested recent highs of 170.87 yen, although it was weighed down by a round of weak manufacturing surveys that left it stranded at $1.0688.
“The decline in the euro zone PMI for June raises some concerns that the nascent recovery has been stalled,” analysts at JP Morgan wrote in a note.
“The sudden decline is notable against the backdrop of the French elections, which companies have explicitly cited as a reason for the slowdown.”
An opinion poll published on Sunday showed that the far-right National Rally party in France and its allies are leading the first round of elections in the country with 35.5% of the votes.
In contrast, US manufacturing surveys showed that activity reached a 26-month high in June, although price pressures remain largely subdued.
The latest shift has whetted appetite for the Personal Consumption Expenditures (PCE) price index due for release on Friday. Annual growth in the Fed’s preferred core index is expected to slow to 2.6% in May, its lowest level in more than three years.
Such an outcome would likely boost market bets on a Fed rate cut as early as September, which is currently priced as a 65% probability.
There are at least five Fed speakers on the agenda this week, including San Francisco Fed President Mary Daly and Fed Governors Lisa Cook and Michael Bowman.
In commodity markets, gold felt the brunt of the stronger dollar and fell to $2,317 per ounce. (J/)
Oil prices also fell slightly after rising by about 3% last week. (or)
The futures price fell 40 cents to $84.84 per barrel, while losing 39 cents to $80.34 per barrel.