Asian shares were subdued on Monday as investors awaited U.S. inflation data, hoping for signs of moderating price increases. Markets were also cautious about potential Japanese intervention as the dollar neared the 160 yen threshold.
Geopolitical events were significant, with the first U.S. presidential debate scheduled for Thursday and the initial round of the French election set for the weekend.
MSCI's broadest index of Asia-Pacific shares outside Japan dipped 0.1%, following a recent two-year high. South Korean stocks declined by 0.5%.
Both S&P 500 futures and Nasdaq futures edged up by around 0.1%. Boeing (NYSE) shares could face pressure after Reuters reported that U.S. prosecutors recommended criminal charges against the aircraft manufacturer.
Japan's Nikkei slipped 0.1%, with the ongoing yen depreciation increasing pressure on the Bank of Japan to tighten policy despite mixed domestic data.
Minutes from the Bank of Japan's latest policy meeting, released on Monday, revealed extensive discussions on tapering bond purchases and raising interest rates.
Japan's top currency official expressed concern over the yen's recent drop, which saw the dollar hit 159.87 on Friday.
The dollar was slightly lower at 159.73 yen, eyeing the 160.17 level where Japan reportedly spent around $60 billion buying yen in late April and early May.
Demand for carry trades, borrowing yen at low rates to invest in higher-yielding currencies, pushed both the Australian and New Zealand dollars to 17-year highs against the yen.
The euro was also testing recent highs at 170.87 yen, despite weak manufacturing surveys (PMI) that kept it steady at $1.0688.
"The decline in the Euro area flash June PMI raises some concern that the nascent rebound is being cut short," analysts at JPMorgan noted.
"The abruptness of the drop is notable against the backdrop of the French election, which firms mentioned explicitly as a reason for the drag."
France's far-right National Rally (RN) party and its allies were leading the first round of the country's elections with 35.5% of the vote, according to a Sunday poll.
In contrast, U.S. manufacturing surveys showed activity at a 26-month high in June, though price pressures had significantly decreased.
This trend increased interest in the personal consumption expenditures (PCE) price index due on Friday. Annual growth in the Federal Reserve's favored core index is expected to slow to 2.6% in May, the lowest in over three years.
Such a result would likely strengthen market expectations for a Fed rate cut as early as September, currently priced at a 65% probability by futures markets.
There are at least five Fed speakers scheduled to speak this week, including San Francisco Fed President Mary Daly and Fed Governors Lisa Cook and Michelle Bowman.
In commodity markets, gold struggled due to a strong dollar, dipping to $2,317 an ounce.
Oil prices also eased slightly after rising about 3% last week.
Paraphrasing text from "Reuters" all rights reserved by the original author.
