Aurelia Butler

SINGAPORE (Reuters) – A bruised dollar was nudged lower still in Asia on Thursday, as traders took surprisingly slow U.S. inflation as a signal U.S. interest rate rises will be all but finished by month’s end.The dollar had its worst session in five months overnight, falling more than 1% against the euro to its lowest in more than a year and notching even larger losses elsewhere.The euro hit a fresh 15-month high of $1.1141 in early Asia trade and the yen, up 0.3% at 138.16 per dollar, was its strongest since mid-May. The U.S. dollar index fell marginally to 100.47, its lowest since April 2022.The New Zealand dollar reached a two-month high of $0.6309 and the Aussie a three-week peak of $0.6796.The moves were small, yet showed traders’ faith the dollar has further to fall. The yuan touched a one-month high at 7.1604 to the dollar in offshore trade. Sterling and Swiss franc were testing overnight highs.U.S. core inflation came in at 0.2% in June against market expectations for 0.3%. Headline annual CPI fell to 3% and has been dropping since hitting a peak at 9.6% a year earlier.”Oversized CPI gains are receding into the distance, and the recent run of inflation data has been very benign,” said Steve Englander, head of global G10 currency research at Standard Chartered (OTC:SCBFF).”We, and increasingly the market, doubt that the Fed will hike again after the 26 July meeting,” he said.”We think the recent dollar underperformance reflects a qualitative shift in market comfort with being short dollars as the terminal Fed policy rate looks increasingly capped.”Interest rate futures showed markets have fully priced a Federal Reserve rate hike later this month, but expectations of any further increases are being wound back.Two-year Treasury yields, which track rate expectations, dropped more than 15 basis points overnight to 4.73%. In Scandinavia, where inflation is looking sticky and central bankers are projecting further rate hikes, currencies surged, with the Swedish and Norwegian crowns up more than 2% and eyeing gains of about 5% for the week.In Asia the yen is up 4.8% against the dollar in five trading days and almost as much on other major crosses as short-sellers have been cleared out and market focus turns to whether the Bank of Japan (BOJ) might soon tweak its yield control policy.Japanese government bond yields rose to multi-month highs on Wednesday, though the closely-watched 10-year yield remains at 0.46%, comfortably below the BOJ’s 0.5% cap, suggesting only modest speculation on a policy shift.Sterling sat at $1.2994, just below its overnight high of $1.3001. The Swiss franc, which hit its highest since 2015 overnight, traded just below that level at 0.8661 francs to the dollar.Chinese trade data is due later on Thursday, along with minutes from last month’s European Central Bank meeting, European industrial production data and British monthly GDP. More

SEOUL (Reuters) -South Korea’s central bank on Thursday held interest rates steady for a fourth straight meeting, as expected, faced with softening but still high inflation and heightened financial uncertainty. The Bank of Korea (BOK) said its seven-member monetary policy board voted to keep the base rate unchanged at 3.50%, as it did in meetings in February, April and May. Domestic markets showed muted reaction as the decision was in line with the unanimous forecasts of 46 economists surveyed by Reuters.The BOK has kept monetary policy unchanged since its last interest rate hike in January and its tightening campaign, which began in August 2021, is widely expected to be over.South Korea’s annual consumer inflation has eased since peaking at a 24-year high of 6.3% in July 2022. The rate stood at 2.7% in June this year, although it is still higher than the central bank’s medium-term target of 2%.The decision comes amid heightened worries about a sluggish property market that has weighed on liquidity conditions of financial institutions.South Korea’s heavily trade-reliant economy has been losing momentum this year due to a slowing global economy, weak chip sector and still sluggish demand from China, although consumer sentiment ticked up in June to its highest in just over a year. More

(Reuters) – A look at the day ahead in Asian markets from Jamie McGeever, financial markets columnist.Asian markets could not be in better spirits going into the latest South Korean interest rate decision and Chinese trade data on Thursday, thanks to the dollar’s slump and global market rally on Wednesday sparked by another steep decline in U.S. inflation.The one percentage point fall in June headline consumer price inflation to 3.0% strengthened hopes that the U.S. economy is heading for a ‘soft landing’, boosting risk appetite and, more importantly for emerging markets, slamming the dollar.The greenback fell around 1.2% against a basket of major currencies on Wednesday, its biggest fall since November, to its lowest in over a year. Latin American currencies hit a 10-year high, and emerging Asia FX could follow that lead on Thursday.Asia and Pacific currencies in the G10 space were among the best performers on Wednesday. The New Zealand and Australian dollars surged 1.6%, both chalking up their biggest one-day rise since January, and Japan’s yen rose 1.4% for its best day since March.The yen has risen five days in a row, its longest winning streak against the dollar since November. It is up 5% in that time, which has cooled talk of yen-supportive intervention from Japanese authorities and contributed to Japanese stocks’ decline of around the same magnitude.The kiwi dollar’s rally came as traders digested the central bank’s decision on Wednesday to hold its cash rate steady at 5.5%, hitting pause as expected and flagging that rates would be on hold for some time. Most economists still expect rate cuts to come in 2024.The Thai baht, meanwhile, may be subject to greater-than-usual volatility and political risk on Thursday as Thailand’s parliament convenes to elect a prime minister, paving the way for a new government to be formed, likely by early next month.The outcome of Thursday’s vote is far from certain.And the South Korean won will take its cue from the Bank of Korea’s policy decision and guidance. All 46 economists in a Reuters poll say the BOK will keep its key policy rate unchanged at a 15-year high of 3.50% and for the rest of the year.Inflation is at its lowest in 21 months and getting closer to the BOK’s 2% target, so the won could be sensitive to guidance on when the bank might begin easing policy.Chinese trade figures are expected to show yet another sharp fall in cross-border activity last month, with exports and imports predicted to fall 9.5% and 4.5% year on year, respectively. That would be the biggest fall in exports since January – economists at SocGen are penciling in a 15.7% crash.Yes, trade data from China could dampen the mood in Asia, but it would have to be a particularly gloomy set of numbers for the feelgood factor infusing markets to fizzle out completely.Here are key developments that could provide more direction to markets on Thursday:- South Korea interest rate decision- China trade (June)- Thailand parliament elects new prime minister (By Jamie McGeever; Editing by Josie Kao) More