Dollar soaks up suspected yen intervention, Chinese data mixed

SYDNEY, Oct 24 (Reuters) – The U.S. dollar shrugged off another suspected burst of Japanese intervention to lift the yen on Monday, while a slide in Chinese stocks dampened hopes that U.S. interest rate hikes are finally slowing.

The dollar started on a bullish note, reaching 149.70 yen before making a sudden jump to 145.28 within minutes. However, speculators seemed undaunted and pulled the dollar back to 148.90 in choppy trade.

The Financial Times reported on Friday that the Bank of Japan may have sold at least $30 billion to curb yen weakness, which has sharply raised the cost of imports, particularly resources.

Japanese authorities declined to confirm whether they had intervened again, but the price action strongly suggested that they had. read more

Any move to prop up the yen is at odds with the Bank of Japan’s ultra-easy policies and will intensify pressure to retreat from yield curve controls at this week’s policy meeting. read more

Sterling also took action following the news that Boris Johnson withdrew his candidacy for the British Prime Ministership.

That boosted former finance minister and market-preferred candidate Rishi Sunak’s chances of winning power and eased the political uncertainty hanging over the pound, at least for a while. read more

The news initially saw sterling rise almost a cent to $1.1402, but failed to hold and was last traded at $1.1307 as investors awaited more clarity on the contest.

Stocks extended a late rally on Friday, largely as the Federal Reserve debated when to slow growth in New York and could signal a step back at its November meeting.

Markets are still pricing in a 75 basis point hike next month, but have scaled back bets on a corresponding move in December. Peak rates also fell to 4.87%, down from 5.0% earlier last week.

ECB, BoC RAISE

Just the chance of a less aggressive Fed helped S&P 500 futures add 0.1% in Asia, while Nasdaq futures rose 0.2%. EUROSTOXX 50 futures were up 0.7%, and FTSE futures were up 0.1%.

Japan’s Nikkei (.N225) gained 0.6% and South Korea’s (.KS11) gained 0.9%, but MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) was off 1.1% as Chinese stocks fell. lost

Chinese blue chips (.CSI300) fell 1.7% as the yuan continued to slide and Xi Jinping secured an unprecedented third term in office by electing a top governing body packed with loyalists. read more

Delayed gross domestic product (GDP) data showed China’s economy grew by 3.9% in the third quarter, beating forecasts of 3.5%, but disappointing retail sales of 2.5%. read more

Markets are now awaiting Thursday’s US GDP figures and key inflation measures the following day. The economy is projected to grow 2.1% annually in the third quarter, with the Atlanta Fed’s GDP Now estimate at 2.9%.

Sentiment will also be checked by some key gains reported by Apple ( AAPL.O ), Microsoft ( MSFT.O ), Google-parent Alphabet ( GOOGL.O ) and Amazon ( AMZN.O ).

The European Central Bank meets this week and is widely expected to raise interest rates by 75 basis points, although it is less clear whether it will signal such a move in December.

“While we do not expect any dovish policy signal, we remain biased towards a lower rate path than currently priced in by markets,” analysts at NatWest Markets said in a note.

“We forecast a peak of +50 bpd in December and +25 bpd in early 2023 at 2.25%,” they said. “There is more uncertainty around QT (quantitative tightening), where sales starting in Q1 2023 could well be announced.”

The euro briefly rose to $0.9899 at the beginning of the session before dropping to $0.9835.

The Bank of Canada is also expected to tighten by 75 basis points at its meeting this week. read more

The prospect of a slowdown in U.S. interest rate hikes helped offset some of the recent heavy losses in bonds, with U.S. 10-year Treasury yields falling to 4.16% from a 15-year peak of 4.337% on Friday.

In commodity markets, an ounce of gold was excluded from the level of $1,654.

Oil prices gave up early gains after soft data on Chinese demand. Brent fell 42 cents to $93.08 a barrel, while US crude oil fell 41 cents to $84.64.

Reporting by Wayne Cole; Edited by Jacqueline Wong and Christopher Cushing

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