We
had more US debt limit talks Thursday evening US time and headlines
to the effect that Biden and McCarthy were ‘near’ a debt limit
deal. More on what this entails in the bullet point above. Yesterday
Fitch placed the US on negative credit rating watch, today the firm
did the same for US home lending facilitators Freddie Mac and Fannie
Mae.

From
Japan today we had Tokyo area inflation data for May. All three
measures remained above 3%. The headline and ‘excluding fresh food’
indexes fell below their April results. However the index that
excludes food and energy, known as core-core and the closest to the
US measure of core inflation, rose from April to hit a 40 year high.
Underlying
price pressures remain worrisome despite the Bank of Japan continuing
to insist that their forecasts show inflation is transitory. Also
from Japan today were verbal intervention comments from finance
minister Suzuki. He popped his head up to say he is closely watching
FX moves and added that FX rates should be set by market based on
fundamentals. This, of course, is in response to the rapid yen
weakening we have seen.

Speaking
of weakening, the People’s Bank of China stepped aside from
supporting the yuan this week. The PBOC raised the USD/CNY reference
rate today by another 230+ points to 7.0760. This is the weakest for
CNY (i.e. highest for USD/CNY) since December 1 last year. For the
week the central rate is up (i.e. weaker CNY) more than 600 points.

The
US Commerce Secretary and Chinese Commerce Minister met. Both sides
issued ‘readouts’ indicative of the two sides working together,
at least in this sector and at this level.

Major
FX traded in confined ranges. USD/JPY tested above 140.00 but is
under there as I post. AUD, AUD, NZD, GBP, CAD are just a little
firmer against the USD.

Asian
equity markets:

• Hong Kong markets were closed for a holiday today

• Japan’s Nikkei 225 +1%

• China’s Shanghai Composite -0.6%

• South Korea’s KOSPI +0.3%

• Australia’s S&P/ASX 200 +0.1%

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• Source: https://www.forexlive.com/news/forexlive-asia-pacific-fx-news-wrap-tokyo-core-core-cpi-hits-a-40-year-high-20230526/