Stocks shrug off inflation angst, yen bows to dollar

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World shares and the dollar inched higher and gold was at a three-month low as traders’ attention continued to swing between the battle to lower inflation and speculation about currency market intervention in China and Japan. | Reuters

Spain reported its annual inflation rate had dropped to 1.9 percent in June, its lowest since March 2021. Equivalent numbers from Europe’s biggest economy, Germany, are due out too while the world’s top central bankers were decamping from an ECB-hosted get-together near Lisbon.

Overnight in Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan had fallen 0.5 percent with holidays in Singapore, India and Malaysia making for thinner trading. The yuan eased to 7.2491 per dollar, just a whisker away from its eight-month trough hit a day ago. That was despite another stronger-than-expected official rate from the People’s Bank of China, which investors read as Beijing trying to steady the yuan.Japan’s yen, meanwhile, touched a more than seven-month low versus the dollar. The dollar’s surge of more than 11 percent against the yen since late March has seen it reach 144.

Shane Oliver, chief economist at AMP in Sydney said though that China might not mind its currency falling a bit further because it helps support its giant export sector Germany’s 10 year bond yield, the benchmark for the currency bloc, was 4.5 basis points higher at 2.36 percent, while the two-year yield was up 4 bps at 3.21 percent.

European Central Bank President Christine Lagarde, on the other hand, further cemented expectations for a ninth consecutive rise in euro zone rates in July. Markets have all but priced in two more rate hikes from the ECB this year.

 

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