Asian stocks fell on Monday amid the imminent release of U.S. price data that investors are counting on to show renewed moderation in inflation, while markets were on alert for Japanese intervention as the dollar tested the 160 yen barrier.
The continued decline of the yen is putting pressure on the Bank of Japan to tighten policy despite unstable local data. Minutes from the Bank of Japan’s latest policy meeting on Monday showed there was much discussion about scaling back the bond-buying program and raising interest rates.
A senior Japanese currency official came out early to express his disapproval of the recent yen depreciation, which led the dollar to reach 159.94 yen. In contrast, U.S. manufacturing surveys showed activity reached its highest level in 26 months in June, despite a significant easing of price pressures.
Annual growth in the Federal Reserve’s preferred core inflation measure (PCE) is expected to slow, and a lower outcome is likely to boost market bets on a Federal Reserve rate cut as early as September, which is currently priced at a 65% probability.
