0648 GMT - The dollar rises as traders continue to bet on the Federal Reserve raising interest rates this year and digest the latest developments in the Middle East conflict. The dollar should remain strong until the Iran war is over, Commerzbank's Antje Praefcke says in a note. Only then would it become clear how prices will develop and whether rate-rise expectations are truly justified, she says. "We have our doubts about this and, as a result, see potential for a correction in the dollar." President Trump has weighed a return to all-out war with Iran but has decided to stick with diplomatic talks for now, the WSJ reports. The DXY dollar index rises 0.1% to 101.328. (renae.dyer@wsj.com)
0642 GMT - The Japanese Ministry of Finance's recent monthlong pause on foreign-exchange intervention was likely a strategic one rather than an approval of a weaker yen, says SMBC Nikko Securities economist Junichi Makino. The finance ministry likely judged that it would be wiser to pause currency intervention because expectations for higher U.S. rates would diminish the effectiveness of any intervention, Makino says. MOF data show it conducted no yen-buying operations between May 28 and June 26. The dollar was last trading at 162.71 yen. (megumi.fujikawa@wsj.com)
0634 GMT - The dollar looks deeply overbought against the yen, based on a relative strength index of 81.4 on daily chart, Sucden Financial's research team says in commentary. This raises the probability of a corrective pullback of the dollar toward the 20-day simple moving average near 161 yen or structural support at 161.20 yen, the team says. The U.S. nonfarm payrolls report due Thursday represents a key near-term catalyst, as strong data would reinforce hawkish Fed monetary-policy expectations and possibly lift the dollar above 163 yen, the team says. However, "a disappointing print could provide the backdrop for profit-taking at these extreme levels," the team adds. The dollar is 0.1% higher at 162.70 yen, LSEG data show. (ronnie.harui@wsj.com)
0611 GMT - Reserve demand and liquidity preference continue to underpin the U.S. Treasury market, with external investors favoring the front end of the curve, BNY's Geoff Yu says in a note. The immediate catalyst is this week's U.S. labor market data, the EMEA macro strategist says. "A resilient employment report would reinforce the current backdrop of anchored inflation expectations, supporting U.S. real yields, Treasury demand and, by extension, the dollar," he says. U.S. nonfarm payrolls data are due for release on Thursday. (emese.bartha@wsj.com)
0559 GMT - The Bank of Japan's tankan survey released Wednesday reflects Japanese firms' recent business conditions, including higher input costs, labor shortages and still-accommodative funding conditions. "These factors suggest that the Bank of Japan's June policy rate hike was appropriately timed," says Harumi Taguchi of S&P Global Market Intelligence. "While the outlook indicates that cost pass-through will continue, expectations for future borrowing interest rates are also rising," the economist says. "The Bank of Japan is likely to proceed with monetary normalization while closely monitoring the impact of higher interest rates, especially on small and medium-sized enterprises."(megumi.fujikawa@wsj.com)
0551 GMT - German Bund yields look set to open higher after the sharp U.S.-led correction over quarter-end, Commerzbank's Hauke Siemssen says in a note. Flash estimate eurozone HICP data--with the headline print expected to decelerate--argues for a stabilisation just below 2.9% for the 10-year Bund yield, the rates strategist says. "Bunds are under pressure and 10-year yields look set to break out of the recently established range today, opening just below 2.9%." The U.S.-led selloff will take its toll on Bunds this morning, he says. In supply, Germany will auction 3.5 billion euros in November 2032 Bunds. (emese.bartha@wsj.com)
0539 GMT - U.S. two- and 10-year Treasury yields hit one-week highs of 4.181% and 4.473%, respectively in Asian trade before coming off peaks. The rise in yields points to a solid U.S. economy coupled with inflationary pressure, while Middle East peace talks still see back-and-forth steps. President Trump has weighed a return to all-out war with Iran but has decided to stick with diplomatic talks for now, according to U.S. officials familiar with the discussion. On the data front, June employment data on Thursday are awaited to confirm continued strength of the labor market, even as some cooling is expected. Meanwhile, oil prices are edging up. The two-year Treasury yield is up 3.7 basis points at 4.175%, while the 10-year is up 4.3 basis points at 4.464%, according to Tradeweb. (emese.bartha@wsj.com)
0531 GMT - The path of least resistance for the dollar/yen pair remains higher, says Carol Kong, currency strategist a the Commonwealth Bank. Despite the pair trading near multi-decade highs, another round of FX intervention doesn't appear imminent, she adds. The latest warnings from Japanese officials have been noticeably less forceful than the rhetoric seen ahead of the intervention in late April, Kong says. That said, Thursday's U.S. payrolls report could provide the next major catalyst. A stronger-than-expected result could prompt markets to further reprice the outlook for U.S. interest rates, potentially pushing dollar/yen toward the 165 level and testing the Ministry of Finance's resolve to defend the currency, Kong says. (james.glynn@wsj.com; Twitter @JamesGlynnWSJ)
0529 GMT - Singapore's flattish residential property price trend is likely to bode well for local developers, as it is expected to keep policy risk at a manageable level, says Citi analyst Brandon Lee in a note. The city-state's private property prices rose 0.5% in 2Q on quarter, slowing from 1Q's 0.9% gain, he notes. While slower growth should reduce the risk of the city-state implementing policy changes, softer sales in certain regions and resale prices of Singapore public housing could cap prices for coming mass-market residential launches, the analyst says. These launches make up around 62% of the 2026 pipeline, he notes. Citi retains City Developments and UOL as its top sector picks. (megan.cheah@wsj.com)
0523 GMT - Australian house prices continued to decline in June, and aren't likely to bottom out until early next year, says Abhijit Surya, senior economist at Capital Economics. Recent housing tax changes have yet to have a significant impact on house prices, with stretched affordability the main driver behind the continuing downturn, he says. The two-speed housing cycle remains alive and well, with the decline in aggregate prices driven almost entirely by Sydney and Melbourne, he notes. But while house prices in midsize capital cities did eke out moderate gains, they too have lost substantial momentum since the start of the year, Surya adds. (james.glynn@wsj.com; X @JamesGlynnWSJ)
0520 GMT - India's manufacturing PMI eased to 54.2 in June from 55.0 in May, according to the purchasing managers survey compiled by S&P Global and HSBC. Growth of new orders and output were among the weakest in four years, while international sales rose at the softest pace since March 2023, the data show. "The moderation suggests demand has cooled slightly after the earlier surge linked to the Middle East conflict," says Pranjul Bhandari, chief India economist at HSBC. Fierce market competition is weighing on client appetite, some firms reported, making goods producers more reluctant to increase prices. "Both the input and output price indices declined, pointing to softer inflation pressures as geopolitical disruptions begin receding," Bhandari says. (kimberley.kao@wsj.com)
0518 GMT - The immediate outlook for the dollar-yen pair is for its grind higher to continue, with currently nothing to detract from attractiveness of the short-yen carry trade, even after adjusting for volatility, says Ray Attrill, head of FX strategy at National Australia Bank. But it will be a grind, given the ever-present threat of foreign exchange intervention, he adds. That said, given the "zero bang for the big bucks" the Ministry of Finance and Bank of Japan got with intervention in April, it is understandable that Japanese officials would be hesitant to run a repeat exercise for the same zero return, Attrill adds. Not that they might not feel obligated to try sooner rather than later, so as not to be accused of crying wolf, he adds. (james.glynn@wsj.com; X @JamesGlynnWSJ)