Aurelia Butler

ISTANBUL (Reuters) – Istanbul barber Hakim Ekinci, a long-time supporter of Tayyip Erdogan, won’t be voting for the president next Sunday, blaming his economic policies for eroding Turks’ purchasing power and leaving many unable to afford even basic foodstuff.Erdogan and his Islamist-rooted AK Party were able to maintain their voter base, made up mainly of lower-income, conservative Muslim Turks, thanks to strong economic growth in the first 10 years of his rule.But a cost-of-living crisis sparked by Erdogan’s unorthodox economic programme over the past 1-1/2 years has eroded his popularity, posing the biggest electoral challenge to his 20-year hold on power.Some polls show Erdogan trailing his main opponent Kemal Kilicdaroglu ahead of Sunday’s first round vote – although the gap has recently narrowed. The parliamentary race remains on a razor edge, with the opposition seen potentially clinching a narrow majority.”We used to be able to buy three to four bags of groceries for 150-200 lira ($7.7-$10). My wife and I could hardly carry them. Now we can barely fill two bags,” said Ekinci, 63, pausing to clip a customer’s hair in his salon in Istanbul’s Besiktas district.”I’d say those responsible are the ones governing us. I think it is the wrong decisions they have taken. I used to be an AKP supporter but I’m not thinking of voting for them.”Ekinci’s views are representative of millions of Turks, who have had to deal with runaway inflation for years. Food prices surged 54% year-on-year in April, with headline inflation dropping to 43.7% after peaking in October at 85.5%, the highest under Erdogan’s rule.Annual inflation has remained in double digits for nearly all of the five years since general elections in 2018. It began to surge after a currency crisis in late 2021, sparked by a series of interest rate cuts, in line with Erdogan’s unorthodox views.Ekinci said he began to question his support for the president and the AKP due to economic reasons shortly after the 2018 elections and made a definite decision not to vote for them after the currency crisis in 2021. The Turkish lira lost 44% in 2021 and 30% in 2022. It has shed 76% under Erdogan’s second term as president, marked by several currency crises due to unorthodox policies, geopolitical developments such as the Ukraine war and disputes between Ankara and Washington.”The exchange rate is uncontrollable. We can’t afford anything. Nothing they said has held, therefore they do not inspire any confidence,” Ekinci said.WORDS AND ACTIONThe barber works by himself after having to lay off his two staff and said he cannot secure any bank loans despite the rate cuts as authorities limit consumer loans to anchor inflation. His foreign currency loans also multiplied in lira terms as the currency fell.But many AKP voters still believe only Erdogan can fix the economy, or blame other factors for its current state. Istanbul resident Halime Duman said people raising prices to make bigger profits were to blame for the soaring cost of living. “(Erdogan) can solve it with a flick of his wrist,” she said, taking a break from shopping at a farmers’ market in central Istanbul. The opposition, including Kilicdaroglu’s opposition alliance, is all talk, in her opinion.”They don’t take action,” she said. Birol Baskan, an author and political analyst not affiliated with any party, said even “hardcore” Erdogan supporters don’t deny that the economy is not doing as well as it did earlier in his rule.”The reason why this party kept winning was because it delivered to voters certain material benefits. This is the first time that magic seems not to be working because of the economy, because of the high inflation (and) increasing cost of living.””It badly hurt people’s pocket and that’s why I guess winning this election is no longer so assured.”‘NOTHING BUT HUNGER’Some voters are not confident that the opposition would immediately alleviate economic concerns either. Talat Gul, a marble mason, has never voted for the AKP or its allies. He currently sees “nothing but hunger” around him, but doubts things will quickly change for the better if the opposition wins.”They have created in the last 21 years a Turkey that cannot be changed. It will take 20 years to recover, whoever comes to power. But I just want (Erdogan) to go,” he said, walking around the farmers’ market.Ekinci, the barber, has yet to decide whom to vote for among the three candidates standing against Erdogan. “(Kilicdaroglu) may be an honest person… but they have not announced anything to convince me,” he said.”I want the dollar exchange rate to decline (after the elections). I want the price of petrol to fall. I want inflation to fall,” Ekinci said.”I want to go back to my life of five or six years ago. I want to be able to go on a picnic, travel abroad.”($1 = 19.4961 liras) More

ISTANBUL (Reuters) – If Turks oust President Tayyip Erdogan in elections this month it will largely be because of an economic reversal that saw their prosperity, equality and ability to meet basic needs start to tumble midway through his two-decade reign. The May 14 vote, which lands during the Turkish Republic’s centenary year, is Erdogan’s biggest test yet. Some polls show he is trailing an opposition candidate, Kemal Kilicdaroglu, who would reverse his unorthodox and heavy-handed economic policies. Erdogan’s support has slipped in the last few years as a series of currency crashes and a deepening cost-of-living crisis were brought on by his policy of slashing interest rates in the face of soaring inflation. But by other measures of economic well-being the decline began earlier, around 2013, which marked a turnaround after a decade of high growth and prosperity under Erdogan and his Islamic-rooted AK Party. That was the year that unprecedented nationwide protests against his government prompted a lasting crackdown on civil liberties. At the same time, a global reversal in market liquidity left Turkey and other emerging markets starved for funding. Starting in 2013, foreign investors began abandoning Turkish assets, eventually leaving FX, credit and debt markets heavily state-managed in the emerging market economy that was once a star among Western fund managers. “In the past, Erdogan could deliver for supporters. But the economic crisis was damaging. His supporters still like him, and love him even, but they have been unhappy about having to pay the price for that,” said Seda Demiralp, chair of the Department of International Relations at Isik University in Istanbul. Erdogan retains strong support among rural and working-class conservatives and nationalists. He and his ruling coalition could yet prevail in the presidential and parliamentary votes, polls show. The government says its rate cuts boosted exports and investments as part of a programme that encouraged lira holdings. It doubled the minimum wage in the last 18 months and spent record levels on social aid, helping keep economic growth strong at above 5% last year. The stimulus helped unemployment dip to 10% from near 14% in the last two years. But by cutting the policy rate to 8.5% from 19% since 2021, authorities sent inflation soaring to its highest level under Erdogan’s watch to above 85% last year. The last time annual inflation touched the official target of 5% was in 2011.The year 2011 was also when inequality began rising, according to a Gini index of income and wealth distribution. This trend accelerated in 2013, wiping out big gains made in 2006-2010 during Erdogan’s first decade in charge. The UK-based think tank Legantum Institute ranks Turkey 95th globally in its prosperity index, down 23 places since 2011 due to declines in governance and personal freedom. (Graphic: Cost-of-living crisis gripped Turkish households, https://www.reuters.com/graphics/TURKEY-ELECTION/ERDOGAN-ECONOMY/byprlxnngpe/chart_eikon.jpg) (Graphic: Inequality made a comeback, https://www.reuters.com/graphics/TURKEY-ECONOMY/ERDOGAN/yzdpxldlepx/chart.png) RISE AND FALLErdogan’s emerging AK Party (AKP) won power in 2002 as the economy was rebounding from its worst slump since the 1970s, on a promise to break with the mismanagement and recessions that had long frustrated Turks. He became prime minister just as austerity imposed under a 2001-2 International Monetary Fund programme eased, and he leveraged that rebound and a diplomatic pivot to the West to bring about a decade of prosperity. Poverty and unemployment plunged. Inflation that was in triple digits a decade earlier cooled, boosting the Turkish lira’s appeal. Western easy-money policies in the wake of the 2008-09 financial crisis brought a rush of cheap foreign credit and fuelled a Turkish construction boom. Erdogan seemed untouchable. But things started changing in 2013, when protests centred on Istanbul’s Gezi Park swept the country, prompting widespread clashes, arrests and incarceration. At the same time, Western easy-money dried up, sparking an exodus of funds from Turkey and curbing its cheap credit boom. The years 2012-2013 marked a turning point for per capita GDP, which measures prosperity in dollar terms, and for employment and other gauges of economic well-being. It was the high water mark for foreign investment, according to official bond holdings statistics and Turkey Data Monitor. The lira’s value has since plunged – including by 80% versus the dollar in the last five years – sapping Turks’ purchasing power. (Graphic: Turks’ smaller economic footprint, https://www.reuters.com/graphics/TURKEY-ELECTION/ERDOGAN/akveqnabavr/chart.png)(Graphic: Exodus of foreign investment, https://www.reuters.com/graphics/TURKEY-ELECTION/zjvqjdkdzpx/chart_eikon.jpg) Murat Ucer, an advisor to Global Source Partners and lecturer at Istanbul’s Koc University, said that advances in productivity seen during the AKP’s early years began reversing after the 2008-2009 global financial crisis, with credit becoming the key driver of growth instead. This, combined with the real lira depreciation that later took hold is “one possible explanation of this turnaround in Turkey’s fortunes since 2013 – or why the average Turk started getting poorer in U.S. dollar terms,” he said. CRACKDOWN AND ISOLATIONErdogan shocked many when his government quashed the 2013 Gezi Park protests. “The protests were both a response to and a further impetus for the increasing authoritarianism of the AKP government…and led Erdogan to wage an all-out war against his opponents using the entire government apparatus,” said Ates Altinordu, assistant professor of sociology at Sabanci University. The attempted coup of 2016 by parts of the military and blamed by Ankara on U.S.-based cleric Fethullah Gulen, who denies involvement, then prompted a harsh state of emergency that, Altinordu said, “formalized Erdogan’s personalistic rule supported by a batch of obsequious advisers of questionable credentials”. “The confluence of these factors created the perfect political storm for economic failure,” he added. Yet other key measures such as healthcare, infrastructure and market access remain robust after improving dramatically since Erdogan took office in 2003, helping his AKP win more than a dozen subsequent elections. Erdogan has a “base of adoring and loyal supporters (because) citizens enjoyed significantly better living standards than…for most of the 20th century,” wrote Soner Cagaptay in his 2021 book, A Sultan in Autumn. Before Erdogan came to power Turkey’s infant mortality rate was comparable to pre-war Syria’s, and is now similar to Spain’s, he wrote.But over the last decade, political divisions have intensified across the country as Erdogan turned to nationalist allies to secure parliamentary majorities. He later won a tight referendum on adopting the presidential system that concentrated power at his palace.Some key economic officials left the AKP in opposition to the power grab. Analysts say cracks then started emerging in its policies, including pressure on the central bank to slash rates even as the lira tipped into crisis in 2018 and late 2021. “Everyone remembers the early Erdogan government when he was seen to create an inclusive economy. But really it left unprecedented portions of society fully dependent on the government, and it’s unsustainable,” said Bulent Gultekin, a former Turkish central bank governor who is an associate professor at Wharton University. “If Erdogan wins the election and continues his economic policy it will come to a complete crash at one point. It’s a pretty dark picture,” he said. “You can postpone things for a while, but eventually you need to pay the bill.”(Graphic: The lira’s long decline, https://www.reuters.com/graphics/TURKEY-ELECTION/ERDOGAN-ECONOMY/gdvzqngzzpw/chart.png) More

ROME (Reuters) -Italy’s Treasury is open to reducing its 64% stake in Monte dei Paschi di Siena (MPS) through one or more share sales on the market, three people briefed on the matter told Reuters.Such an option, however, would only be considered if financially advantageous and as long as any significant new investor would manage the holding in line with the national interest, one of the sources said without elaborating.Commitments taken with the European Union at the time of the bank’s bailout in 2017 bind Italy to eventually sell out of MPS and any significant co-shareholder in the bank could play a role in aiding or hindering the Treasury’s exit strategy.No decision has been taken for now, the source added. MPS declined to comment.After rescuing MPS at a cost of 5.4 billion euros ($6 billion) for taxpayers back in 2017, Rome pumped another 1.6 billion into the Tuscan bank last November when it covered 64% of a 2.5 billion euro capital raise.Under CEO Luigi Lovaglio, MPS pulled off the risky capital raise in rocky markets roughly a year after the collapse of merger talks between the Treasury and healthier rival bank UniCredit to take over MPS.Two of the sources said the ministry had started considering an initial share placement earlier this year, holding meetings with some banks that could arrange the sale.At the time, shares in MPS were trading well above the price of 2 euros each at which it sold new shares in the autumn.However, the rally in late February prompted French shareholder AXA, MPS’ insurance partner, to sell the 8% stake it had acquired in the new share issue.Refinitiv Eikon data show MPS shares hit a 52-week high at 2.6 euros each in early March.They closed up 2.5% at 2.03 euros on Friday, not far from the price of the share sale whose proceeds MPS used to fund staff exits and replenish its capital reserves.One or more market placements would not hinder the search for strategic partners, another of the sources said.Banking regulators still see a merger with a stronger peer as the best option for MPS, a supervisory source told Reuters, but both UniCredit and smaller rival Banco BPM, which the Treasury has long identified as the most suitable merger candidates, have repeatedly denied any interest.Prime Minister Giorgia Meloni has repeatedly said that MPS’s privatisation should foster the creation of several large banking groups in the country.($1 = 0.9081 euros) More

BANGKOK (Reuters) -Shanghai resident Daniel Bian drank in the sweeping views over the Thai capital as he lay on a deckchair beside a swimming pool on the 19th floor of a luxury condominium.”I feel alive. I feel free,” said an excited Bian, dapper in tinted sunglasses, flat-topped navy blue hat and a wraparound tunic cinched at the waist, his hair hanging loosely to his shoulders. “This is my dream.” Cooped up in China for three years under some of the world’s toughest curbs against COVID-19, Bian is among a flood of mainland Chinese hunting for property buys in the southeast Asian nation since Beijing opened its borders this year. Many Chinese are eager to invest in a residence overseas, keen for a safety net in case of a similar disease outbreak, and also to hedge against economic risks at home. Thailand was the most popular outbound destination for Chinese travelers during the May labour day holiday, data from website Trip.com showed, followed by Japan and South Korea.And the Southeast Asian nation’s good international schools and quality medical facilities are drawing increasing numbers keen to acquire a second home. Thailand expects at least 5 million Chinese visitors this year, some set to buy property, although the figure is still a far cry from the era before COVID, when they made up nearly a third of the 40 million arrivals. “There is definitely demand from China for properties in Thailand,” said Mesak Chunharakchot, the president of the Thai Real Estate Association.Topping buyers’ lists are locations in major cities such as the capital, Bangkok, along with Chiang Mai in the mountainous north, the east coast beach resort of Pattaya and the northeastern region of Isan, he added.”Chinese are buying houses, sending their children to international schools and having their parents come stay in Thailand to take care of the grandkids.”Nearly 270,000 Chinese tourists visited Thailand in March, government data shows, a three-year high, though well below the figure of 985,227 in March 2019, before the pandemic took hold. The share of Chinese students at Singapore International School Bangkok rose to 12% to 13% early this year, or 400 from a student body of 3,100 on four campuses, outstripping the figure of 6% during pre-pandemic 2019.”In China, when things are closed – it’s overnight, nobody can go out,” the school’s chief executive, Kelvin Koh, told Reuters. “This affected the behaviour of Chinese families.” Despite Thai rules that limit foreign ownership to just 49% of the units in any condominium development, prospective buyers are pouring in, bringing business to real estate agents who target Chinese buyers.One such agent is Owen Zhu, who escorted Bian, 50, and his 70-year-old mother, fashionable in close-fitting white dress topped off with matching hat and veil, through viewings of three high-end apartments in Bangkok during a day-long property tour. “It has changed a lot after the pandemic. Most of the Chinese choose to buy luxury apartments to live in,” said Zhu.Many clients who earlier bought for investment purposes have now zeroed in on property typically costing more than 2 million yuan ($290,000), he added. “The budget can only buy a simple home in China’s first-tier cities, and its location might not be good,” Zhu said.”But with that money they can buy a luxury apartment in the heart of Bangkok. Therefore some would sell one of the houses in China and buy a property here for retirement.”Bian, who organises cultural exchanges between China and other countries, also sees fewer constraints in Thailand. “The freedom to enter or leave the country, to travel back and forth. As well as the freedom of society, and life. Freedom is very important,” Bian said.($1=6.9110 Chinese yuan renminbi) More

Good morning. You’ll receive the newsletter from me this week while Henry is away. We’ve learned Azerbaijan and Armenia will resume peace talks in Brussels this weekend, after a recent uptick in fighting over the territory of Nagorno-Karabakh.Today, our Brussels bureau chief and our trade correspondent discuss the next package of Russia sanctions. And my colleague explains why EU demands on critical raw materials have been rebuffed by Australia.Whack-a-moleThe EU’s 11th package of sanctions on Russia is meant to be an exercise in closing down loopholes. But that doesn’t mean it will be easy to land, write Sam Fleming and Andy Bounds. Context: EU members want to further tighten the noose around key sectors of the Russian economy. But with little left to hit there, the discussions have focused on countering sanctions evasion through third countries. Among the most radical ideas is a mechanism that would allow the EU to restrict sales of certain products to other third countries that then leak into Russia.Critics, however, fear that targeting countries through which banned goods transit could alienate them. “We want to do this in such a way that we don’t push those third countries towards China or Russia,” an EU diplomat said.According to the text, which will need to be unanimously approved by member states, the bloc would first try to counter circumvention through diplomatic means, using more restrictive measures for certain goods as last resort. The sanctions would, if approved, also explicitly target a handful of companies in countries including China, because of claims they are selling equipment that could be used in weapons. Member state representatives will discuss the draft on Wednesday, and it could still change.Other parts of the proposed package focus on ironing out wrinkles and listing dozens of new individuals and entities.Brussels has, for example, proposed ending the temporary exemption from the Russian oil embargo for the north Druzhba pipeline to Poland and Germany. The proposed sanctions also include ending the transit of certain goods through Russia and fresh export controls for newly identified dual-use goods.More controversial proposals such as imposing sanctions on the Russian nuclear sector did not make it into the current text. Still, expect lengthy discussions. “Experience has shown that these proposals need to be studied in detail,” one senior EU diplomat said. Chart du jour: (No) dealIn March, Serbia and Kosovo struck a deal that would pave the way for Belgrade to recognise its former province as a sovereign state. But the agreement has begun to unravel.Critical talksThe EU and Australia are edging closer to a free trade deal, but a European push for safeguards on raw material prices has received short shrift in recent negotiations, writes Ian Johnston.Context: Europe wants to diversify its supply chains of critical raw materials used in technologies such as electric cars, and Australia is a leading producer of minerals such as lithium and cobalt. A trade agreement could boost EU access to these products and reduce reliance on China.The commission wants EU countries to extract at least 10 per cent of the strategic raw materials they use by 2030. It is also aiming for 40 per cent self-sufficiency in raw materials processing.“Critical raw materials diplomacy” will be key to making up for the current shortfall, an EU official said last week. But these efforts hit a stumbling block at a recent round of talks with Australian negotiators.Australian officials rebuffed EU requests for it to rule out ever implementing export price controls on its raw materials, according to a person familiar with the negotiations. A similar clause was included in the EU’s recent trade deal with Chile, and would prevent Australia from charging EU purchasers of Australian raw materials more than local buyers.But Canberra did not wish to “tie its hands”, the person said. Australian states and territories also have a say on resource management, complicating the request.Other sticking points include EU access to Australian agricultural products. The bloc also wants Australia to accept its rules on geographically protected products, which would mean that Australian feta or parmesan producers would have to rename their goods. Chief negotiators will meet again at the end of May in Australia as talks enter the end phase. “We aim to conclude by this summer, but only if progress on substance allows this,” the commission said.What to watch today EU parliament kicks off plenary session in Strasbourg.German economy minister Robert Habeck and EU competition commissioner Margrethe Vestager meet to talk economic transformation.Now read theseIn the interim(s): Slovakia’s caretaker prime minister Eduard Heger has resigned, deepening political turmoil and encouraging pro-Russian voices.Bad rap: Ukraine’s western allies should acknowledge the country’s progress in fighting corruption, writes Martin Sandbu.‘Qatargate’ latest: The judge leading the investigations into the EU corruption scandal hints at what is to come. More

Last week, I quoted a recent speech by US national security adviser Jake Sullivan, in which he asked, “How does trade fit into our international economic policy, and what problems is it seeking to solve?” As I’ll argue here, we should start by seeking to solve the problem of concentration and competition.Leaving aside the question of whether Beijing invades Taiwan (an enormous question, of course, but stick with me), many of the current US and European concerns with China are about the way in which the country’s state-run system encourages economic concentration, and the fact that this concentration is then deployed in mercantilist ways.China has for years been able to flood global markets with everything from cheap steel to underpriced PPE to higher end goods, thanks to its ability to artificially depress wages as well as ignore environmental concerns and (all too often) WTO rules. Thanks to its singular economies of scale, China is on track to become the world’s biggest EV exporter, which will inevitably lead to a spate of new trade disputes.China also has monopoly power in many crucial supply chains including pharmaceutical inputs and rare earth minerals. According to a 2022 US-China Economic and Security Commission review, 41.6 per cent of US penicillin imports came from the country, which also has 76 per cent of global battery cell manufacturing capacity within its borders, 73.6 per cent of permanent magnets (a critical component of electric vehicles), and from 2017 to 2020, supplied 78 per cent of US imports of rare earth compounds. The US has its own supply of certain minerals but, thanks to Chinese subsidies, some domestic American businesses have ceased production.This kind of monopoly power poses both a security threat and a competitiveness one. China has made numerous clear statements about wanting to ringfence some crucial global supply chains while reducing its dependence on foreign countries in others. No country wants to worry about having crucial drugs or commodities cut off.Let’s be clear — Beijing didn’t reach over and “steal” production, investments and jobs from elsewhere. Instead Chinese central and local government simply deployed subsidies for decades, offered discounted land and gave major tax breaks to producers in order to entice localisation within China. Western companies naturally followed, given that shareholder capitalism requires business leaders to chase the highest share price and the lowest consumer costs (and, crucially, doesn’t account for the resulting negative externalities in labour, climate or security). But monopoly power is by no means just a China problem — or indeed solely an international one. Deregulation and weaker enforcement of antitrust laws in the US since the 1980s has led to extreme corporate concentration. Walmart sells more than half of all groceries in some areas of the country, Amazon dominates ecommerce, a handful of companies control food supply, a single railroad (BNSF) ships 47 per cent of all grain.The existing giants grow ever bigger and more powerful. JPMorgan acquires yet another failed bank. Food inflation is rising, as insurance Allianz calculates that about 10 per cent of the jump in Europe reflects the search for higher profits. This is made possible by the fact that key parts of the food supply chain are dominated by a handful of players.Chinese mercantilism, European and US corporate price gouging, American Big Tech and Too Big To Fail banks are really all disparate parts of one problem — too much concentration of power in one place. This leads to market fragility, less innovation (which tends to come from smaller companies and more, rather than less, competition), security concerns and defensiveness on the part of states that worry they could be cut off from crucial supplies.China, of course, has been subject to US export bans and is understandably anxious about it. While it is legitimate for any country to limit the export of technology that could be used for defence purposes by an adversary, it’s also true that teasing out dual-use technologies is a tricky business. Total decoupling between the west and China is not what anyone wants. So, how to square the circle? I’m beginning to think that we should institute a new market principle that Barry Lynn, the head of the Open Markets Institute, an antimonopoly think-tank in Washington DC, calls “a rule of four”. In crucial areas, from food to fuel to consumer electronics, critical minerals, pharmaceutical products and so on, no country or individual company should make up more than 25 per cent of the market. What’s more, countries should apply this rule both locally and globally. This would be a way for nations to support free trade, while also being able to build up resilient and redundant supply chains. It would buffer the global race to the bottom in which cheap capital is forever flowing to places with the cheapest labour and lowest environmental standards. It would, of course, require a total revamp of the WTO. But that wouldn’t be a bad thing, since many countries feel it is not functional anyway.This isn’t a perfect solution. But it’s a way to start shifting focus from trade wars, cold wars and class wars to the main culprit in all of those things — too much power in too few [email protected] More

SINGAPORE (Reuters) – The dollar was catching its breath on Monday after dropping last week when the Federal Reserve hinted at an end to the U.S. rate increase cycle, with traders turning their focus to U.S. inflation and bank lending data for the week ahead.Sterling, which hovered at $1.2633, just below an 11-month high hit on Friday, was also in traders’ minds ahead of an expected Bank of England rate increase on Thursday.The euro, which has rallied nearly 16% from September lows, was losing a little bit of momentum at $1.1021 and has struggled to break resistance at $1.11.The yen slipped slightly, reflecting Friday’s move higher in U.S. bond yields that followed strong jobs data.The dollar/yen was last 0.2% higher at 135.05. Last week the Federal Reserve and the European Central Bank each raised rates by 25 basis points and offered varying degrees of caution about the outlook, which markets took as signals that rate rises are slowing or stopping.U.S. interest rate futures are pricing about a one-third chance of a rate cut as soon as July, according to the CME FedWatch tool – even though stronger-than-forecast U.S. jobs data released on Friday suggests that might be premature. “The Fed has tended to guide away from the possibility of rate cuts this year, which is somewhat at odds with a rates market which is pricing in cuts,” HSBC analysts said in a note.”If the Fed is proved right over the course of 2023, then it will make it harder for the dollar decline to extend,” the analysts wrote. “But for the time being, the market is likely to run with the theme of a peak in Fed rates justifying a clear peak in the dollar.”The U.S. dollar index dropped for a second week in a row last week, losing about 0.4%. The Antipodean currencies also logged solid gains last week, but remain short of clear breaks into new territory. The Aussie dollar was steady at $0.6749 in early trade but faces a hurdle around $0.68. The New Zealand dollar held at $0.6298, with resistance around $0.6365. [AUD/]Later Monday, the Fed’s loan officer survey might show whether and how hard banks are tightening up on credit after three U.S. lenders failed over recent weeks – which could weigh on the dollar if it puts downward pressure on interest rates.Traders will also be watching headlines from Capitol Hill as lawmakers attempt to negotiate an impasse over the looming U.S. debt ceiling, with the Treasury Secretary warning the government might be unable to pay debts by June 1.U.S. inflation data is due on Wednesday.”There is a risk that regional bank issues could escalate, posing a broader risk to the financial system and taking the dollar (higher),” said Standard Chartered (OTC:SCBFF)’s head of G10 FX research, Steve Englander.”However, the resilience of big banks makes that unlikely, in our view,” Englander said. “We think that the escalation of debt-ceiling concerns is a more likely source of risk-off dollar strength via demand for immediate dollar liquidity.”========================================================Currency bid prices at 0024 GMTDescription RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change Session Euro/Dollar $1.1021 $1.1019 +0.01% +0.00% +1.1036 +1.1016 Dollar/Yen 135.0050 134.7900 +0.26% +0.00% +135.2850 +134.9900 Euro/Yen 148.80 148.57 +0.15% +0.00% +149.0800 +148.6400 Dollar/Swiss 0.8906 0.8905 +0.03% +0.00% +0.8912 +0.8908 Sterling/Dollar 1.2632 1.2631 +0.02% +0.00% +1.2638 +1.2627 Dollar/Canadian 1.3381 1.3374 +0.06% +0.00% +1.3385 +1.3371 Aussie/Dollar 0.6750 0.6750 -0.01% +0.00% +0.6755 +0.6747 NZ Dollar/Dollar 0.6300 0.6293 +0.08% +0.00% +0.6303 +0.6294 All spotsTokyo spotsEurope spots Volatilities Tokyo Forex market info from BOJ More

SYDNEY (Reuters) – Asian shares crept higher on Monday as investors braced for a week where U.S. inflation data will test wagers the next move in interest rates will be down, while worries about a possible credit crunch weighed on the dollar.Friday’s robust U.S. payrolls report has already delivered a setback to easing hopes and any upside surprise on consumer prices would challenge bets for a rate cut as soon as September.Forecasts are for a rise of 0.4% in April for both the headline and core CPI, with the annual pace of core inflation slowing just a tick to 5.5%. Later Monday, the Federal Reserve’s survey of loan officers will draw an unusual amount of attention as markets seek to gauge the impact of regional banking stress on lending.”The survey should point to further broad-based tightening in bank lending standards,” said Bruce Kasman, head of economic research at JPMorgan (NYSE:JPM).”Continued stress in the banking system does, of course, increase concern that a disruptive financial market event is on the horizon,” he added. “Though our analysis suggests that the impact of a credit tightening against an otherwise healthy backdrop tends to be limited.”Caution made for a slow start in markets and MSCI’s broadest index of Asia-Pacific shares outside Japan edged up 0.3%, while Japan’s Nikkei eased 0.3%.S&P 500 futures and Nasdaq futures were both off 0.1%, after jumping on Friday in the wake of Apple (NASDAQ:AAPL)’s upbeat results. [.N]While the S&P 500 is up almost 8% for the year so far, all of that is due to just five mega stocks which have collectively risen by 29% so far this year and trade at a 49% premium to the rest of the index.Bond markets were still stinging from the strong payrolls report with U.S. two-year yields up at 3.95% after briefly getting as low at 3.657% last week.Futures imply a near 90% chance the Fed will keep rates steady at its next meeting in June, and a 75% probability of a cut in September.The market is still pricing in at least one more hike from the European Central Bank, while the Bank of England is widely expected to lift its rates by a quarter point on Thursday..The diverging outlook on rates has underpinned the euro and pound, with the latter hitting a one-year high on the U.S. dollar last week. The euro was holding at $1.1018 on Monday, just short of its recent top of $1.1096.”While it is premature to get too ‘beared up’ on the dollar until a clearer peak in U.S. rates is seen, the U.S. banking sector travails that have no easy/costless solutions, continue to make for a mildly bearish medium-term story,” said Alan Ruskin, head of global FX strategy at Deutsche Bank (ETR:DBKGn).”Certainly it imposes more growth constraints and a greater stagflationary bias than for major competing economies.”The dollar has fared better on the yen as the Bank of Japan remains the only central bank in the developed world to not have tightened policy. The dollar stood at 135.19 yen, with the euro at 148.93 and not far from its recent 15-year peak of 151.55.The prospect of a pause in U.S. rate hikes has been a boon for non-yielding gold which was holding at $2,015 an ounce after nearing a record high last week. [GOL/]Oil prices have been going the other way as fears of a global economic slowdown outweighed planned output cuts to see U.S. crude shed more than 7% last week. [O/R]Brent was last up 3 cents at $75.33 a barrel, while U.S. crude added 5 cents to $71.39 per barrel. More