The dollar retreated against most major counterparts as traders weighed the likelihood that the Federal Reserve will raise interest rates next month. A rebound in the yen weighed on Japanese shares as oil slid for a fourth day.
A gauge of the greenback’s strength declined following a run of three weekly gains. The yen rose from near this month’s low as Japan’s trade surplus swelled and after the U.S. said there isn’t a case for any intervention to weaken the currency. The Topix index retreated from this month’s high in Tokyo, while Taiwan’s Taiex jumped the most since January. U.S. crude fell for a fourth day, slipping toward $48 a barrel after Iran said it won’t countenance freezing output until its production is back at pre-sanctions levels.
While the minutes of the Fed’s April policy meeting jolted markets last week by signaling a June rate hike is possible, China’s uneven growth picture and the U.K.’s June referendum on European Union membership are reasons for the central bank to exercise some restraint when it comes to tightening. Regional Fed chiefs for St. Louis, San Francisco and Philadelphia are due to speak Monday and their comments may shed light on prospects for borrowing costs to be raised next month. The odds of such a move jumped seven-fold to 28 percent over the last five trading days, Fed Funds futures show.
“There are several conflicting cross currents in financial markets, but the wash-up is the Fed’s message is that the world is better than you think and the market seems to be warming to this view,” Chris Weston, chief market strategist in Melbourne at IG Ltd., said in an e-mail to clients. “The greenback remains a key focus this week.”
Preliminary assessments of manufacturing this month in the U.S. and the euro area are due Monday, while a reading for Japan showed a deterioration. Taiwan has data on industrial output coming, while Singapore and Hong Kong release figures on consumer prices. Financial markets in Canada are closed for a holiday.
The Bloomberg Dollar Spot Index, a gauge of the greenback against 10 major peers, dropped 0.2 percent as of 11:45 a.m. in Tokyo, after rallying 0.8 percent last week.
The euro gained 0.1 percent, advancing for a second day. Candidates for Austria’s anti-immigration Freedom Party and a nominee backed by the Green Party were tied following a run-off vote in the European country’s presidential election. Greek lawmakers on Sunday approved additional austerity measures required to unlock more emergency loans from the euro area, ahead of a meeting of finance ministers that will assess the country’s compliance with its bailout program and determine the scope for debt relief.
The yen climbed 0.4 percent to 109.75 per dollar after losing ground in each of the last three weeks as Japanese officials warned they may intervene to weaken the currency, which has strengthened about 10 percent this year. Finance Minister Taro Aso raised the issue in a meeting with U.S. Treasury Secretary Jacob J. Lew, who said yen moves haven’t been overly volatile. The two were attending a meeting of Group of Seven central bank governors and finance ministers in Japan.
The won strengthened 0.5 percent versus the greenback, while the Australian and New Zealand dollars gained 0.2 percent.
The MSCI Asia Pacific Index rose 0.2 percent, after falling as much as 0.6 percent. The Topix lost 1 percent as Japan reported a seventh straight drop in monthly exports. The Shanghai Composite gained 0.6 percent, while the Taiex surged 2 percent.
Futures on the S&P 500 were little changed after the benchmark advanced 0.6 percent on Friday, while contracts on the U.K.’s FTSE 100 Index gained 0.1 percent.
“Market repricing of Fed tightening risk was the big driver last week, and that could carry over into this week,” Win Thin, head of emerging markets at Brown Brothers Harriman & Co. in New York, said in an e-mail to clients. “There are several Fed speakers in the days ahead, capped off with Fed chief Yellen on Friday.”
Fed Bank of Boston President Eric Rosengren told the Financial Times at the weekend that he’s ready to back a rate increase. St Louis Fed President James Bullard speaks in Beijing Monday, while John Williams of the San Francisco Fed is due to give an address in New York. Philadelphia Fed chief Patrick Harker delivers two speeches this week, while Fed Chair Janet Yellen will speak at Harvard University on Friday.
Last week, New York Fed chief William Dudley touted the prospect of policy tightening at one of the central bank’s next two meetings, while Richmond Fed President Jeffrey Lacker said the case for hiking in June would likely be “very strong.”
Crude oil fell 0.5 percent to $48.19 a barrel in New York. Exports from Iran could surpass 2.2 million barrels a day by mid-summer, the head of National Iranian Oil Co. said, according to the Mehr news agency.
Oil has surged more than 80 percent from a 12-year low earlier this year on signs the global surplus will ease as U.S. output declines. The Organization of Petroleum Exporting Countries is unlikely to set a production target when the group meets June 2 as it sticks with Saudi Arabia’s strategy to squeeze out rivals, according to all but 1 of 27 analysts surveyed by Bloomberg.