Asian markets on Wednesday might also get some relief from the dollar’s slip on Tuesday in line with U.S. bond yields. But it’s a mixed bag for Asian currencies.
Japan’s yen rebounded after the country’s top currency diplomat said authorities are closely watching currency moves and won’t rule out any options. The meeting of officials from the Treasury, central bank and financial watchdog came as the yen slid to a six-month low through 140.00 per dollar.
U.S. futures market positioning data shows that hedge funds are holding their largest net short yen position since October last year. Taking that and Tokyo’s warning on FX together, the yen’s rebound could continue this week.
A catalyst for a similar snap higher in the Chinese yuan, however, does not appear to be on the immediate horizon. Chinese blue chip stocks and Hong Kong tech stocks closed up on Tuesday, but not before printing fresh six-month lows.
China’s PMI figures for May are expected to show another contraction in manufacturing activity. Service sector activity has been expanding since January, however, and it will be the extent to which that accelerates or slows that markets will be most attuned to.
China’s post-lockdown economic recovery has fallen far short of investors’ and policymakers’ expectations. The PMI figures will show if that trend is continuing or not.
