Aurelia Butler

TOKYO (Reuters) – The dollar held off a 10-month high on Friday as markets headed into the end of the quarter, giving the yen slightly more breathing room at the end of the week amid intervention concerns. The euro largely held its ground after rebounding overnight, but was still not far from its January low of $1.0482, which if broken would be the lowest since December.The dollar index, which tracks the currency against six other majors, was mostly flat in the Asian morning, on track for an 11th straight week of gains, after dipping as low as 106.020 overnight.The dollar gained on expectations that the U.S. economy would remain more resilient to higher interest rates than other economies, after the Federal Reserve last week warned that it may raise rates further and is likely to hold them high for longer.U.S. Treasury yields, which had been lending support to the dollar’s rise, fell from multi-year highs overnight, as technical factors kicked in to stall their surge.At the same time markets look ahead to key PCE data released later on Friday, the U.S. appears to be headed toward a partial government shutdown, which could affect the release of economic data, providing little visibility on how the economy is doing.That could create a “vacuum of uncertainty” as the Federal Reserve tries to determine whether another rate increase is needed this year, said Tony Sycamore, market analyst at IG.”When we’ve got central banks that are data dependent… and they can’t get that data in a timely fashion, it does, I think, create another reason to move to the sidelines in some of these asset classes,” Sycamore said. Richmond Fed President Thomas Barkin on Thursday said it’s unclear whether more monetary policy changes will be needed in coming month.The yen remains in focus as it trades near the 150 level, which is viewed as potentially spurring intervention from Japanese authorities.Against the dollar, the Japanese currency last traded at 149.34 yen.Core inflation in Japan’s capital slowed in September for the third straight month mainly on falling fuel costs, data showed on Friday, suggesting that cost-push pressures are starting to peak, in a relief for the fragile economic recovery.Separate data showed factory output was flat in August, a sign companies were feeling the pain from soft global demand and weak signs in China’s economy.Although intervention in the currency market may have limited impact, “the government would lose nothing politically by demonstrating to the Japanese public that it is serious about tackling the surge in import prices that results from a weaker yen”, said Yasunari Ueno, chief market economist at Mizuho Securities, in a note to clients. Elsewhere, the euro stood at $1.05625, down 0.04% so far in Asia after climbing off this week’s multi-month low of $1.0488. Investors will be looking ahead to Friday’s CPI data out of the euro zone for clues into the state of the bloc’s economy. More

TOKYO (Reuters) -Core inflation in Japan’s capital slowed in September for the third straight month mainly on falling fuel costs, data showed on Friday, suggesting that cost-push pressures are starting to peak in a relief for the fragile economic recovery.But separate data showed factory output was flat in August, a sign companies were feeling the pain from soft global demand and weak signs in China’s economy.The Tokyo core consumer price index (CPI), which excludes volatile fresh food but includes fuel costs, rose 2.5% in September from a year earlier, against a median market forecast for a 2.6% gain.It slowed from a 2.8% increase in August but exceeded the Bank of Japan’s 2% target for the 16th straight month.An index that strips away both fresh food and fuel costs, which is closely watched by the BOJ as a better gauge of broad price trends, rose 3.8% in September from a year earlier after a 4.0% gain in August, the data showed.While inflation is slowing, continued rises in food, daily necessities and service prices will likely keep the BOJ under pressure to phase out its massive stimulus, analysts say.”Even though inflation is now moderating, it is doing so less quickly than the Bank of Japan had anticipated. Accordingly, the Board will need to revise up their inflation forecast for the current fiscal year further at their next meeting in October,” said Marcel Thieliant, head of Asia-Pacific at Capital Economics.”Our view is that the Bank will use the current window of opportunity to abandon negative interest rates and have pencilled in a rate hike in January next year.”A spike in global commodity prices last year drove many Japanese companies to shed their aversion to price hikes and pass on higher costs to households, keeping inflation above the BOJ’s target for longer than policymakers initially expected.The inflation overshoot led the BOJ to make modest tweaks to its bond yield control policy last month, a move investors saw as a shift away from decades of ultra-loose monetary policy.But Governor Kazuo Ueda has ruled out the chance of an early exit from ultra-loose policy, saying that it needs to wait until wages rise enough to keep inflation sustainably around 2%.Underscoring the fragile nature of Japan’s export-reliant economy, factory output in August was flat as production for cars, steel goods and machinery fell.Manufacturers surveyed by the Ministry of Economy, Trade and Industry expect output to rise 5.8% in September and increase 3.8% in October, the data showed on Friday. More

BENGALURU (Reuters) – Australia’s central bank will hold its key interest rate steady at 4.10% on Tuesday but hike it to a peak of 4.35% next quarter as inflation remains above target, a Reuters poll of economists found.The inflation rate, which is nearly twice as high as the Reserve Bank of Australia’s (RBA) target of 2%-3% at 5.2% in August, suggests further monetary policy tightening may be required to get prices under control.All but two of 32 economists in a Sept. 27-28 poll expected the RBA to hold its official cash rate at 4.10% on Oct. 3. Two forecast a 25 basis-point hike.”One month’s higher inflation print especially driven by oil is unlikely to sway the RBA to hike. Indeed, trimmed inflation actually slowed…suggesting the Bank has more reason to be on hold,” said Shreya Sodhani, research analyst at Barclays.”Opposing trends in terms of rising services inflation, easing goods inflation, softer growth and relatively easier but still tight labour markets will likely keep the RBA focused on data. While we do expect one more hike from the Bank, it is a close call with the risk being the hiking cycle is over.”Sodhani expects the final hike to come in November, a week after a broader quarterly inflation data release due on Oct. 25. Most economists expect the RBA to wait for that and jobs data before making a decision.A slim majority of economists, 17 of 30, predicted the RBA would raise rates to 4.35% or higher by the end of 2023. The remaining 13 forecast no change.Among major local banks, ANZ, CBA, and Westpac said the RBA is done with its tightening cycle. Only NAB expected another 25 basis points hike in November.The Australian dollar has weakened more than 6% this year, which is likely to fuel imported inflation and poses challenges for newly appointed RBA Governor Michele Bullock, whose first meeting is in October.”We think if the RBA is going to hike again, it will need to be this year, as we don’t believe the current inflation backsliding will last beyond the year-end. That may also provide some additional lift to the AUD,” noted Robert Carnell, economist at ING.Median forecasts showed rates holding steady at 4.35% until at least the end of March. A 25 basis-point rate cut was expected every quarter thereafter, taking them to 3.60% by the end of 2024.”We expect inflation to continue coming down and to reach target by late 2024 and that will be enough for the RBA to cut rates,” said Ben Udy, lead economist at Oxford Economics Australia. More

(Reuters) – The Asian Development Bank (ADB) unveiled new capital reforms on Friday that will unlock $100 billion in new financing capacity over 10 years as the lender expands its development and anti-poverty mission to tackle climate change and other global crises.The Manila-based lender said it was adjusting its risk appetite and reducing its minimum-level of capitalization in a way that preserves its top tier AAA credit rating while allowing it to expand its lending commitments by nearly 40% to about $36 billion annually.ADB’s move to stretch its balance sheet follows similar measures announced by the World Bank earlier this year that will yield a $50 billion increase in lending over a decade. But the ADB’s effort will yield twice the new lending on an “apples to apples” comparison, ADB Managing Director General Woochong Um told Reuters in an interview.ADB has traditionally taken a more conservative approach, maintaining a higher risk-adjusted capital ratio than the World Bank and other multilateral development banks, said Roberta Casali, vice president for finance and risk management.So as ADB took a more “granular” approach to analyzing risks, and adjusting downward estimates of unexpected losses, the lender had more room to squeeze new lending from its capital structure than some other banks had, Casali said. Aiding the effort – and providing some comfort to credit ratings agencies – is the creation of a new, $12 billion Countercyclical Lending Buffer fund that can be used to aid ADB member countries in times of unexpected crises, helping to stabilize them and help avoid loan losses.The World Bank said on Thursday it was proposing new capital measures that would add more than $100 billion in new lending over a decade on top of the $50 billion yielded by previous measures. These include use of debt-like hybrid capital and increased use of loan portfolio guarantees. Discussions on expanding lending to fight climate change, pandemics, food insecurity and fragility will be a dominant topic at World Bank-IMF annual meetings in Marrakech, Morocco Oct. 9-15.But with an estimated $3 trillion in annual climate transition financing needs in developing countries, far more capital, private sector participation and innovation will be needed, ADB officials said.”At the end of the day, developing Asia needs trillions of dollars, so we need to go from billions to trillions,” Um said. “All of us – the World Bank, ADB – need to do everything we can to squeeze as much money as possible from our balance sheets.” More

Barkin referenced the current benchmark rate which stands between 5.25% and 5.5%. He also acknowledged the Federal Reserve’s 2% inflation goal and the rising bond yields. Despite these figures, he pointed out that 12 of 19 officials still favored another rate hike.The labor market, according to Barkin, has shown strength with businesses showing reluctance for layoffs. However, he said that a softening of the labor market would be required to curtail inflation. Looking ahead, Barkin mentioned projections for rates going above 6% next year. Additionally, he indicated that fewer cuts are anticipated in 2024. These projections and the current economic landscape underscore the uncertainty surrounding future monetary policy decisions amidst potential disruptions such as a government shutdown.This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. More