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Oil and stock markets were under pressure on Wednesday on worries about the fallout from China’s pandemic lockdowns, while the yen slightly extended its record losing streak as traders put Japan’s ultra-easy monetary policy settings to the test.

The yen, which has tumbled at the same time as Japan - by contrast - vows to stick with ultra loose monetary policy and keep its government bond yields anchored near zero, wallowed at a two-decade low on Wednesday and fell on crosses.The yen, which has tumbled at the same time as Japan - by contrast - vows to stick with ultra loose monetary policy and keep its government bond yields anchored near zero, wallowed at a two-decade low on Wednesday and fell on crosses.

MSCI’s broadest index of Asia-Pacific shares outside Japan was steady as modest losses in Hong Kong and Shanghai offset gains in Sydney. Japan’s Nikkei trimmed early gains to stand 0.5% higher by mid morning. At the same time inflationary pressure from the disruption and from war in Ukraine is adding to markets’ expectation of an aggressive response from US monetary policymakers which is driving US Treasury yields higher and the yen lower.

Minneapolis Fed President Neel Kashkari said overnight that the Federal Reserve will “have to do more” to bring inflation down if China’s lockdowns flow across supply chains.

 

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