Key facts
- South Korea's KOSPI index fell over 6%.
- The South Korean won reached its weakest level against the dollar since March 2009.
- Japan's real wages rose.
- Japan's monetary base decreased by 12.3% in May.
- The 10-year JGB auction yield rose to 2.649%.
- China's central bank withdrew a net 682.7 billion yuan in liquidity for the week.
- The PBOC set the USD/CNY mid-point reference rate at 6.8184.
- Key economic data including inflation and employment reports are scheduled for release this week.
- The RBA is monitoring the impact of higher interest rates and energy price shocks.
- The full impact of policy tightening in Australia is expected in one to two years.
Asian markets displayed caution, with South Korea's KOSPI index experiencing a significant decline of over 6%, and the won reaching its weakest point against the dollar since March 2009. This downturn in South Korea was partly attributed to suggestions that AI companies should share profits. In Japan, real wages saw an increase, but the Finance Minister renewed warnings regarding potential currency intervention. The Bank of Japan reported that Japan's monetary base fell by 12.3% in May, a contraction larger than in the preceding period and below forecasts. Additionally, the yield on the 10-year Japanese Government Bond (JGB) auction increased to 2.649%, up from 2.54% previously. Hong Kong stocks also declined, influenced by tightened capital outflow controls.
China's central bank, the People's Bank of China (PBOC), resumed injecting liquidity on Friday after a two-day pause. However, the net withdrawal of cash for the week amounted to 682.7 billion yuan, marking the largest weekly cash pull in three months. This action is intended to encourage idle bank funds to flow into the broader economy rather than remaining within interbank operations. The PBOC set the daily mid-point reference rate for the yuan against the dollar at 6.8184. This rate was weaker than the market estimate of 6.7673, and the yuan is allowed to trade within a 2% band around this reference point.
Globally, economic data releases are closely watched. Key inflation figures, employment data, and GDP updates are scheduled across Wednesday, Thursday, and Friday. These reports are considered crucial for assessing the economic trajectory and for informing potential shifts in Federal Reserve monetary policy.
In Australia, Reserve Bank of Australia (RBA) Governor Michele Bullock stated that the central bank is actively monitoring economic conditions. The RBA is assessing the combined impact of higher interest rates and the global energy price shock. Bullock indicated that there are signs that the current policy tightening is effectively slowing demand, with the full ramifications of these measures expected to materialize over the next one to two years.