The Asian markets on Monday suffered amid concerns that most major central banks are committed to raising interest rates no matter the risks to growth.

Japanese yen and US dollar banknotes are seen with a currency exchange rate graph in this illustration picture taken on June 16, 2022.
Japanese yen and US dollar banknotes are seen with a currency exchange rate graph in this illustration picture taken on June 16, 2022. (Florence Lo/Illustration/File Photo / Reuters)

Asian shares have gotten off to a rocky start while the dollar remained in demand amid concerns most major central banks are committed to raising interest rates no matter the risks to growth.

Early Monday, MSCI's broadest index of Asia-Pacific shares outside Japan was off 0.4 percent.

Federal Reserve Chair Jerome Powell headlines a host of policymakers at Jackson Hole later in the week and risks are he will not meet investor hopes for a dovish pivot on policy.

"We expect a reminder that more tightening is needed and there is still a lot of progress to be done on inflation, but no explicit commitment to a specific rate hike action for September," said Jan Nevruzi, an analyst at NatWest Markets.

"For markets, a bland delivery like that could be underwhelming."

Futures are fully priced for another hike in September with the only question being whether it will be 50 or 75 basis points.

A Reuters poll of economists forecast the Fed will raise rates by 50 basis points in September.

One exception to the tightening trend is China where the central bank is expected to trim some key lending rates on Monday by between 10 and 15 basis points.

Unease over China's economy tipped the yuan to a three-month low last week while pressuring stocks across the region. 

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Asia markets slip, bonds climb

South Korea's KOSPI shed 1.1 percent while Japan's Nikkei fell 1.0 percent, though it has drawn support from a recent sharp reversal in the yen.

S&P 500 futures eased 0.5 percent and Nasdaq futures 0.6 percent. The S&P 500 has repeatedly failed to clear its 200-day moving average around 4,320 and ended last week down 1.2 percent.

Bank of America's latest survey of investors found most were still bearish though 88 percent did expect lower inflation over time, the highest percentage since the financial crisis.

British 10-year yields climbed by the most in five years following a shock inflation report, while bund yields jumped on a sky-high rise in German producer prices.

Ten-year Treasury yields rose 14 basis points over the week and last stood at 2.99 percent, while the curve remained deeply inverted to reflect the risk of recession.

Dollar tracks high

The general air of global uncertainty has tended to boost the US dollar as a safe haven, sending it 2.3 percent higher last week to 108.18 on a basket of currencies last week in its best performance since April 2020.

"The USD can track above 110.00 week if the August flash PMIs for the major economies show a further slowing in economic growth," said Joseph Capurso, head of international economics at CBA, referring to surveys of manufacturing due on Tuesday.

The dollar was up at 137.04 yen, having shot up 2.5 percent last week, while the euro was struggling at $1.0030 after losing 2.2 percent last week.

Minutes of the European Central Bank's last policy meeting are due and are likely to sound hawkish given they decided to hike by 50 basis points.

The rise in the dollar has been a setback for gold, which was pinned at $1,744 an ounce. Brent was down $1.02 at $95.70, while US crude lost 99 cents to $89.78 per barrel.

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Source: Reuters