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Asia markets hit a three-week high, as the dollar continues to suffer

Image: Reuters Berita 24 English - On Monday, Asian markets rose in lockstep with Wall Street , but the dollar fell to five-week lows as inv...

Image: Reuters

Berita 24 English - On Monday, Asian markets rose in lockstep with Wall Street, but the dollar fell to five-week lows as investors bet on a slowing in US monetary tightening, albeit after two big boosts in June and July.

The news that Shanghai officials will waive numerous criteria for firms to restart operations on Wednesday helped to lighten the atmosphere, easing a city-wide lockdown that began two months ago.

The United States' Memorial Day weekend may result in a light session before the end of the month, but MSCI's broadest index of Asia-Pacific equities outside Japan rose 1.2 percent to a three-week high.

The Nikkei in Japan gained 2.0 percent, while the KOSPI in South Korea gained 1.2 percent. Blue chips in China gained 0.8 percent.

After rallying 6.8% last week, Nasdaq futures climbed another 0.8 percent, while S&P 500 futures firmed 0.5 percent after rallying 6.6 percent last week in their highest week so far this year.

The EUROSTOXX 50 futures increased by 0.6 percent, while the FTSE futures increased by 0.1 percent.

Investors have pounced on suggestions that the Federal Reserve may delay its tightening after a series of sharp hikes over the next two months.

"Hopes for a break in the Fed tightening cycle as early as September, foolish or otherwise, continue to reverberate," said Ray Attrill, head of NAB's FX strategy. "Money markets have lowered their pricing for more Fed rate hikes by the end of 2022 from 193 basis points to 180 basis points."

"However, this still forecasts rate hikes at each of the remaining Fed meetings in 2022, with 50 basis points hikes in both June and July and at least 25 basis points hikes at the remaining three."

Treasuries rallied on the prospect of a less aggressive Fed, with 10-year note rates hovering just above a six-week low of 2.74 percent. This compares to a high of 3.203 percent on May 9.

The safe-haven dollar and yen have fallen as market sentiment has improved, while the euro has risen thanks to hawkish statements from European Central Bank (ECB) officials who have hinted at a rate hike as early as July.

"U.S. economic data look to be stalling, ECB officials are contemplating even faster first rate hikes, and front-end rate differentials have begun to shift in the euro's favor," according to Goldman Sachs analyst Zach Pandl.

"A dramatic downturn in the US economy, if not accompanied by similar weakness in Europe, might result in a meaningful euro bounce," Pandl noted, "but the reverse is also true if US data hold up better than expected." "We believe there are downside risks to US GDP and have advised USD/JPY put options to reflect this."

This emphasizes the significance of this week's key US statistics, which includes the ISM manufacturing survey on Wednesday and the May payrolls report on Friday.

With unemployment at 3.5 percent, payrolls are expected to climb by 320,000, but that would be down from April.

On Monday, the euro was unchanged at $1.0746, after rising 1.6 percent last week to $1.0764. After falling 1.3 percent last week to a five-week low of 101.43, the dollar index was trading at 101.50.

The dollar fell against the yen to 126.98, after finding good support at 126.37 in the previous week.

The dollar's decline aided gold's recovery from recent lows, and the metal was trading around $1,850 per ounce. [GOL/]

Oil prices have been buoyed by anticipation of higher demand as the driving season in the United States begins, and as European countries debate whether to put an outright ban on Russian crude oil.

The EU failed to agree on a Russian oil embargo on Sunday, but diplomats will try again ahead of a Monday-Tuesday conference.

Brent climbed $1.07 to $120.50 per barrel, while US crude gained $1.29 to $116.36.

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