Indonesia to Sign $34 Billion Agreement with U.S. Firms in Bid to Avoid Steep Tariffsa to Sign $34 Billion Agreement with U.S. Firms in Bid to Avoid Steep Tariffs

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Summary:

:Indonesia plans to finalize a $34 billion pact with American partners to increase U.S. imports and investments, aiming to secure a favorable trade deal with Washington ahead of the July 9 deadline and reduce its exposure to proposed 32% tariffs....

Jakarta Seeks Relief from U.S. Tariff Threat

In a strategic move to protect its access to the U.S. market, Indonesia will sign a $34 billion agreement with American business partners next week, aiming to boost imports and investments tied to the bilateral trade relationship. The deal, scheduled for July 7, comes just days before a crucial July 9 deadline for tariff negotiations with the United States. According to Indonesia’s Coordinating Minister for Economic Affairs, Airlangga Hartarto, the agreement is designed to rebalance trade and improve Jakarta’s negotiating position with Washington.

Indonesia is currently at risk of being hit with a 32% tariff on its exports to the U.S., a development that would significantly impact its export competitiveness. To mitigate this risk, Jakarta has proactively offered to increase its import volumes from the U.S., framing the upcoming deal as both a commercial and diplomatic tool.

Trade Surplus Creates Pressure for Concessions

The underlying issue stems from Indonesia’s substantial trade surplus with the United States, which reached $17.9 billion in 2024, according to figures from the U.S. Trade Representative. This imbalance has drawn scrutiny under the Trump administration’s intensified focus on bilateral trade deficits. By committing to large-scale purchases and investment cooperation, Indonesia is signaling its willingness to adjust the trade dynamic and meet some of Washington’s demands without resorting to tariff escalation.

Minister Airlangga emphasized that the $34 billion memorandum of understanding will channel funds into U.S. purchases and Indonesian outbound investments, effectively aligning with U.S. policy preferences to spur export-led job creation. While details of the specific sectors involved remain undisclosed, the announcement reflects Jakarta’s desire to avoid the punitive measures applied to other nations.

Competitive Comparison with Vietnam's Deal

Indonesia’s strategy also reflects its concern over recent U.S. trade concessions granted to Vietnam. On Wednesday, Washington announced it would reduce planned tariffs on Vietnamese exports from 46% to 20%, signaling a more flexible stance when trading partners show willingness to cooperate. Airlangga acknowledged this in his comments, stating Indonesia seeks a deal “better than the one struck with Vietnam.”

This comparison underscores the regional dimension of the U.S. trade agenda in Southeast Asia, where countries are jockeying for preferential treatment amid a shifting tariff landscape. With the United States actively pursuing deals across the region, Indonesia is under pressure to present itself as a constructive and economically valuable partner.

Indonesia’s $34 billion pact with U.S. firms represents a calculated maneuver to secure favorable terms ahead of a looming tariff deadline. By proactively addressing the trade imbalance and signaling commercial alignment with U.S. priorities, Jakarta aims to protect its critical export industries and maintain its competitive edge in the American market. As the July 9 deadline approaches, the success of this strategy will hinge on Washington’s willingness to reward Indonesia’s concessions with tangible tariff relief.

Source: Reuters

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Diversification From U.S. Equities Drives Inflows

Foreign investors have extended their buying of Japanese stocks for a 13th straight week through June 27, according to Japan Exchange Group data, marking the longest uninterrupted accumulation since the early days of Abenomics in 2013. During the latest reporting week alone, foreign net purchases reached ¥339.8 billion (approximately $2.36 billion), reinforcing a strong and sustained interest in Japanese equities despite ongoing global uncertainty.

Analysts attribute this streak to a strategic rotation out of U.S. equities, with investors seeking to rebalance portfolios heavily concentrated in American assets following Wall Street’s recent strength. Shuji Hosoi, senior strategist at Daiwa Securities, noted that this diversification trend may continue for about a year, reflecting both tactical repositioning and longer-term global allocation shifts.

Historical Parallels With Abenomics But Lacking Euphoria

The last comparable run occurred from November 2012 to March 2013, when foreign investors poured ¥5.7 trillion into Japanese stocks, spurred by aggressive monetary and fiscal reforms under Prime Minister Shinzo Abe’s Abenomics agenda. While the current rally lacks a comparable policy-driven catalyst, it underscores Japan’s appeal as a relatively undervalued and structurally stable market in a volatile global investment environment.

This time, however, sentiment appears more measured. Kohei Onishi of MUFG Morgan Stanley suggests that unlike the investor enthusiasm seen during Abenomics, today’s momentum is not fueled by optimism about transformative domestic policy. Instead, it reflects Japan's perceived resilience, low political risk, and strong corporate governance reforms that have slowly built confidence over recent years.

Market Impact Evident in Topix Gains

The surge in foreign buying has coincided with upward movement in the Topix index, which reached a high of 2869.07 on Monday, nearing its record of 2946.60 set in July 2024. This suggests that foreign flows are providing notable support to the broader market, even as domestic consumption remains sluggish and global concerns — especially around renewed U.S. trade tariffs — reemerge.

However, the recent upswing has started to lose steam, with analysts noting that tariff fears continue to cast a shadow over export-sensitive sectors. The sustainability of the rally may now depend on how much further foreign investors are willing to increase exposure without additional structural catalysts.

Caution Ahead as July Approaches

While the current streak reflects confidence in Japanese equity fundamentals, the absence of a bold fiscal or monetary narrative — like that seen in 2013 — means the rally may be vulnerable to a shift in sentiment. Onishi cautions that July could see a slowdown in foreign inflows, particularly if market volatility intensifies or if global rate expectations shift unexpectedly.

Moreover, given the scale of the recent buying and a relatively high valuation compared to recent years, investors may begin to lock in profits or rotate into other Asian markets offering more aggressive growth stories or stimulus-driven upside.

The 13-week streak of foreign purchases in Japanese stocks highlights growing interest in Japan as a diversification play amid global market recalibrations. While reminiscent of the enthusiasm seen during Abenomics, today’s rally is marked by caution rather than euphoria. With global risks lingering and no fresh domestic policy surprises expected, the coming weeks will test whether Japan can sustain this inflow momentum or if investor attention will begin to shift once again.

Source: Bloomberg

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Global attention turned to Vietnam on Thursday, after U.S. President Donald Trump announced a trade deal with Hanoi just days before Washington's reciprocal tariffs come back in full force.

Under the agreement, the U.S. will apply a 20% duty on Vietnamese imports — sharply below the 46% rate Trump had imposed in early April. U.S. imports to Vietnam will meanwhile not be subject to tariffs.

Trump also said that Vietnam had agreed to a 40% duty on any products that originally came from another country, but were sent to Vietnam for final shipment to the U.S. China has reportedly repeatedly relied on this practice, known as transshipping, to avoid trade barriers.

Trump says U.S. struck trade deal with Vietnam that imposes 20% tariff on its imports

Vietnam is one of the few countries that has struck a trade deal with the White House, while the clock ticks down on Trump's 90-day temporary reprieve. Many nations have been left wondering how the future of their trade relationship with the world's largest economy could shape up.

"What we learned from the Vietnam deal is, if anything, the tariffs are going to go up from here, not down," Sebastian Raedler, head of European equity strategy at BofA, told CNBC's "Europe Early Edition" on Thursday.

More emerging market deals ahead?

The deal could be cause for concern for other emerging market economies like Vietnam, economists and strategists at Citi said in a note Thursday.

"On balance, we believe there is more for EM Asia to worry about than expect gains if this deal reflects what is to come soon," they noted.

While the development removes uncertainty and suggests other agreements could emerge in the coming days, the 20% tariff rate is higher than the expected 10% levy on goods, according to Citi's experts. They add that the separate 40% rate on transshipped goods suggests other countries may also need to agree to such a duty.

"Thailand followed by Malaysia might be more exposed than other EM Asia peers (apart from Vietnam). A separate and more punitive tariff on transshipped goods was least expected by the market," the note said.

"Additionally, there may be spillovers to other exporters that have set up factories in Vietnam in past years," for example Korea, it added.

What the deal could mean for Europe

While the Vietnam-U.S. deal suggests more deals likely lie ahead for other Asian countries, it does not necessarily mean that the same is true for the European Union, Lavanya Venkateswaran, senior ASEAN economist at OCBC Bank, told CNBC.

These are the sticking points holding up a U.S.-EU trade deal

"The Vietnamese authorities have been clear about their intent to negotiate with the US, even before the reciprocal announcements were made in April," she said by email, adding that the same was true for other regional economies like Indonesia and Malaysia.

"Compared to these economies, the case with [the] EU has not always been smooth sailing and the US has been more public in its criticism of the EU at different times in the past few months," Venkateswaran said.

A bare-bones deal is Europe's best hope in trade talks with the U.S., sources say

Trade negotiations between the EU and U.S. have been challenging and slow to develop, with sources telling CNBC that a bare-bones "political" deal with scant initial details may be the the EU's best hope at this point. Analysts and economists have also expressed uncertainty about the likelihood of a trade agreement, given key sticking points like big tech regulation, taxation, and broadly mismatched world views.

Trump has called for tariffs as high as 50% on the EU, while the bloc has threatened wide-ranging countermeasures, which have also been paused until next week.

Source: CNBC

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Investor Reassurance Brings Relief After Sharp Selloff

UK financial markets reversed course on Thursday following Prime Minister Keir Starmer’s emphatic backing of Chancellor of the Exchequer Rachel Reeves. His public affirmation, delivered in multiple media appearances, came after a sharp selloff triggered by his earlier hesitation to confirm her tenure during a parliamentary session. The swift rebound in gilts, equities, and sterling reflected a partial restoration of investor confidence.

Yields on 30-year gilts dropped by 12 basis points to 5.30%, reversing much of the previous session’s 19 basis point spike—the largest single-day jump since April. The 10-year gilt yield also retreated, falling nine basis points to 4.52%. Meanwhile, the pound strengthened slightly to $1.3656, recovering from a steep 0.8% decline on Wednesday. The FTSE 250 Index, focused on domestic businesses, climbed 0.5%, signaling that market sentiment had stabilized.

Political Clarity Calms Fiscal Anxiety

Markets had reacted negatively to the perception of instability within the UK’s economic leadership, fearing that a potential replacement for Reeves might loosen fiscal discipline. Her reputation for adhering to self-imposed spending constraints had helped anchor investor expectations during a period of rising debt sensitivity. The abrupt prospect of her departure—amplified by recent political pressure that forced the government to cancel £5 billion in planned welfare cuts—heightened concerns that fiscal credibility might erode.

In a BBC interview late Wednesday and follow-up comments to UK radio on Thursday, Starmer sought to restore confidence. “She and I work together, we think together... We’re in lockstep,” he said, reinforcing the message that Reeves remains central to his economic agenda. His intervention successfully cooled speculation, reaffirming to markets that sudden fiscal policy shifts are unlikely.

Comparisons to 2022 Crisis Surface but Remain Contained

The rapidity of the market's reaction, and the scale of the bond yield movements, recalled echoes of the 2022 UK crisis under former Prime Minister Liz Truss. However, most analysts stopped short of drawing direct parallels. Laurence Mutkin of Bank of Montreal noted that while uncertainty is elevated, the welfare spending reversal is minor in absolute fiscal terms. He added that market disorder is unlikely unless gilt yields approach their 2025 peak of 4.88%, a threshold not yet breached.

Nonetheless, traders have begun embedding a risk premium into UK assets. According to Bloomberg’s macro strategist Ven Ram, this premium may not fully unwind even with Reeves’ continued leadership, as fiscal pressures persist and political fragility remains visible. The market’s relief rally is thus conditional and could prove temporary if further policy volatility or economic missteps arise.

Global Spillover and Broader Yield Implications

The UK’s bond market turbulence extended into U.S. Treasuries on Wednesday, underlining the global interconnectedness of fiscal risk. With the U.S. also facing its own fiscal scrutiny due to President Donald Trump’s advancing tax and spending package, investors are increasingly alert to the implications of public debt levels in both economies. On Thursday, U.S. 10-year yields fell two basis points to 4.26%, mirroring the partial recovery in gilts.

The synchronous bond market movements reflect a broader theme: long-duration sovereign debt remains acutely sensitive to political clarity, fiscal messaging, and central bank policy shifts. Market reactions are increasingly immediate and pronounced, as investors reassess the sustainability of debt issuance in high-rate environments.

While Prime Minister Starmer’s public support for Rachel Reeves has temporarily reassured markets, the episode highlights the heightened scrutiny facing fiscal policy in developed economies. Investors remain focused on the credibility of budget plans and the durability of leadership, particularly in an environment where sovereign borrowing needs are rising. For the UK, the bounce in gilts and the pound offers a reprieve—but not a guarantee of longer-term stability. Markets will continue to demand disciplined policy signals and cohesive political leadership to sustain confidence.

Source: Bloomberg

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US Trade Policy Shift Fuels Stock Rally

U.S.-based chip design software firms Synopsys and Cadence Design Systems posted strong premarket gains on Thursday following the announcement that the United States would lift export restrictions on electronic design automation (EDA) tools to China. The move, which is part of a broader trade easing initiative between Washington and Beijing, was received positively by investors, with Synopsys and Cadence shares climbing 5.9% and 5.4%, respectively. German conglomerate Siemens, also a key player in the EDA market, saw its shares rise 1.3% in Frankfurt.

The Commerce Department’s policy reversal also included the removal of licensing requirements for ethane exports to China, another signal that trade talks between the two nations are beginning to stabilize. These measures are part of a broader rollback of retaliatory restrictions that had been in place since China suspended rare earth mineral exports earlier this year.

China Access Critical for EDA Leaders

The three companies—Synopsys, Cadence, and Siemens—together control over 70% of the Chinese market for chip design software, according to a report from Xinhua. This dominance underscores the strategic importance of the Chinese semiconductor ecosystem to global EDA firms. EDA software is foundational to chip development, enabling the complex design of semiconductors used in smartphones, vehicles, data centers, and AI systems.

The U.S. ban, initially introduced as a response to geopolitical tensions and China's resource curbs, temporarily disrupted this lucrative revenue stream. With access now restored, these firms are poised to recapture lost business and potentially accelerate growth in the world’s second-largest economy.

Repercussions for Global Semiconductor Strategy

While the immediate market reaction has been positive, the policy reversal also reflects the geopolitical balancing act the U.S. faces in managing national security concerns without derailing its own technology sector. By lifting the EDA curbs but maintaining restrictions on advanced chip exports—particularly involving companies like Nvidia—the U.S. has signaled a willingness to differentiate between strategic threat levels within the broader semiconductor value chain.

This selective easing allows Washington to maintain pressure on cutting-edge AI chip development while still permitting commercial flow in upstream design software. For EDA companies, it offers a clearer operating framework, restoring confidence in international market access.

The U.S. decision to lift EDA software export restrictions to China marks a significant shift in trade posture and has immediate implications for global semiconductor firms. For Synopsys, Cadence, and Siemens, the resumption of business in China removes a major source of uncertainty and reinforces their competitive position in a high-demand market. The rally in their share prices reflects not just the earnings potential from renewed sales, but also growing investor confidence that a broader thaw in tech-related trade relations may be underway.

Source: Reuters

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Marginal Expansion Follows Prior Contraction

The euro zone’s services industry, which accounts for the bulk of the region’s economic activity, staged a modest recovery in June, with the HCOB Services PMI climbing to 50.5 from May’s 49.7. This movement back into expansionary territory, though only marginal, reverses a brief contraction and suggests a tentative stabilization in the post-pandemic European economy. The improvement was also slightly better than the preliminary estimate of 50.0.

However, chief economist Cyrus de la Rubia of Hamburg Commercial Bank emphasized that this recovery comes during the longest period of subdued growth recorded in the PMI’s 27-year history. The sector has been hovering around the growth threshold for months, highlighting the fragility of demand across the bloc.

Composite Output Reflects Persistent Weakness

The broader composite PMI, which blends manufacturing and services output, edged up to 50.6, the highest level in three months, signaling only tepid overall economic expansion. While services activity lifted the index, manufacturing continues to act as a drag. Importantly, new business volumes, a key indicator of future output, contracted for the 13th straight month, although the pace of decline slowed notably to just below neutral at 49.7.

Despite the weak inflow of new work, companies in the services sector have continued to add staff. June marked the fourth consecutive month of job creation, extending a hiring streak that has now lasted nearly four-and-a-half years, suggesting firms remain cautiously optimistic about medium-term prospects.

Divergence Across Euro Zone Economies

National performance varied considerably within the bloc. Ireland maintained its lead in services growth for the fourth month running, although the pace slowed to its weakest since January. Spain, meanwhile, surpassed Italy in momentum, and Germany moved back into expansion. France continued to underperform, recording its tenth consecutive month of contraction and remaining the only major euro zone economy still in decline.

This geographical disparity underscores the uneven nature of the recovery, with some economies benefiting more from domestic resilience and external demand, while others continue to grapple with structural or policy-driven obstacles.

Inflation Pressures Complicate Policy Outlook

Input cost inflation in the services sector eased to a seven-month low, suggesting some relief in cost pressures. However, selling prices rose at the fastest rate in three months. This combination of still-elevated costs and accelerating output prices may pose a challenge for the European Central Bank, which has recently shifted to rate cuts after a prolonged tightening cycle.

Cyrus de la Rubia noted that the ECB is unlikely to be entirely comfortable with the resurgence in price pressures, especially within the labor-intensive services sector, where wage dynamics play a significant role. While a Reuters poll of economists indicated that the ECB is expected to deliver one more rate cut in September, the evolving inflation trend could limit its room for maneuver.

Confidence Rebounds But Lags Historical Norms

Encouragingly, business sentiment among service providers improved in June, reaching its highest level in 2025 so far. This represents a recovery from the 29-month low recorded in April. Yet, overall optimism remains below the long-term average, signaling that firms are still wary of downside risks, including consumer spending weakness, geopolitical tensions, and policy uncertainty.

The return to marginal growth in the euro zone’s services sector offers a cautiously positive signal, but the broader picture remains one of subdued expansion and vulnerability. While business confidence has improved and hiring continues, the ongoing weakness in new orders and persistent inflation pressures—particularly in service charges—suggest the recovery remains fragile. For the ECB, this environment presents a difficult balancing act: supporting growth through rate cuts while preventing inflation from becoming entrenched again. The coming months will test whether this modest upturn can evolve into a more durable recovery.

Source: Reuters

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Cryptocurrency

Strategic Shift in China’s Crypto Stance

In a move that could redefine China's approach to digital finance, major Chinese technology firms JD.com and Ant Group are lobbying the People’s Bank of China (PBOC) to permit the creation of offshore stablecoins tied to the yuan. According to sources close to the matter, the proposal centers on issuing these digital assets in Hong Kong, allowing them to circulate internationally while operating outside China's strict capital controls.

This effort marks a departure from Beijing’s prior posture, particularly given its 2021 blanket ban on cryptocurrencies. The lobbying suggests a growing recognition that the yuan's international use may require engagement with blockchain-based financial instruments, especially as U.S. dollar-pegged stablecoins increasingly penetrate global trade settlements and digital finance infrastructure.

Stablecoins as a Tool for Yuan Internationalisation

Stablecoins, backed by fiat currencies or liquid assets, have rapidly grown as instruments for real-time, borderless payments. The dominance of U.S. dollar-denominated stablecoins, which account for more than 99% of global stablecoin issuance according to the Bank for International Settlements, has raised concern among Chinese policy and business leaders.

By issuing a stablecoin pegged to the offshore yuan (CNH), Chinese firms aim to provide an alternative for international transactions, potentially increasing the yuan’s relevance in global trade and digital settlement networks. JD.com, in particular, has argued that the expansion of dollar stablecoins poses a strategic threat to China’s ambitions for currency internationalisation, noting the inefficiencies of current cross-border yuan payment systems.

Hong Kong as a Launchpad for Offshore Digital Yuan

The proposal is closely tied to Hong Kong’s forthcoming digital asset regulation, set to take effect on August 1. Both JD.com and Ant are preparing to issue stablecoins backed by the Hong Kong dollar, but are urging regulators to permit yuan-pegged options as well. Given Hong Kong’s currency is itself tied to the U.S. dollar, industry leaders argue it offers little strategic leverage for the yuan.

JD.com has proposed a phased rollout, beginning with yuan stablecoin issuance in Hong Kong, then expanding to China’s offshore free trade zones. According to internal sources, this proposal has received a positive initial reception from regulators, though formal approval has not yet been granted.

Market Dynamics Reflect a Dollar-Centric Reality

Despite China's ambitions, the yuan’s global share in payment settlements remains modest. According to SWIFT, the yuan accounted for only 2.89% of international payments in May, down from previous highs, while the U.S. dollar dominated with a 48.46% share. Capital controls and geopolitical risk have historically limited the yuan’s liquidity and trust as a trade settlement currency, making stablecoin development an attractive workaround.

The demand-side pressure for such alternatives is already visible. Traders at Hong Kong’s Crypto HK report a fivefold increase since 2021 in Chinese clients using USDT (Tether) for trade-related settlements. Exporters cite capital restrictions and volatility in emerging market currencies as key reasons for adopting dollar-pegged digital assets.

Global Regulatory Shifts Fuel Urgency

The push for a yuan-based stablecoin also reflects global developments. U.S. President Donald Trump’s administration has openly embraced stablecoins, advancing regulatory frameworks to legitimize their use in the American financial system. This has accelerated the international spread of U.S. digital assets and increased competitive pressure on countries seeking monetary sovereignty in digital finance.

In response, Chinese policymakers appear to be reassessing their stance. PBOC Governor Pan Gongsheng recently acknowledged the regulatory challenge posed by stablecoins. Meanwhile, PBOC advisor Huang Yiping told Chinese media that an offshore yuan stablecoin was “a possibility,” suggesting that the door is now open for selective experimentation.

The lobbying by JD.com and Ant Group underscores a broader recalibration within China’s financial strategy. While Beijing remains cautious about cryptocurrency risk, the rapid rise of dollar-denominated stablecoins and their use in trade has forced a reassessment of priorities. If approved, a yuan-pegged stablecoin issued offshore could become a powerful tool in China’s long-running effort to promote the yuan internationally, potentially altering the balance of power in global digital finance. The next phase will depend not only on regulatory alignment but also on the private sector’s ability to offer stable, liquid, and trusted instruments that can match the global reach of their U.S. counterparts.

Source: Reuters

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Indonesia to Sign $34 Billion Agreement with U.S. Firms in Bid to Avoid Steep Tariffsa to Sign $34 Billion Agreement with U.S. Firms in Bid to Avoid Steep Tariffs

Jakarta Seeks Relief from U.S. Tariff Threat

Trade Surplus Creates Pressure for Concessions

Competitive Comparison with Vietnam's Deal

Source: Reuters

Foreign Inflows Into Japanese Stocks Reach Longest Streak Since Abenomics Era

Diversification From U.S. Equities Drives Inflows

Historical Parallels With Abenomics But Lacking Euphoria

Market Impact Evident in Topix Gains

Caution Ahead as July Approaches

Source: Bloomberg

What The U.S.-Vietnam Trade Deal Tells Us About The Future of Tariffs

Trump says U.S. struck trade deal with Vietnam that imposes 20% tariff on its imports

More emerging market deals ahead?

What the deal could mean for Europe

These are the sticking points holding up a U.S.-EU trade deal

A bare-bones deal is Europe's best hope in trade talks with the U.S., sources say

Source: CNBC

UK Markets Stabilize After Starmer Affirms Long-Term Support for Chancellor Reeves

Investor Reassurance Brings Relief After Sharp Selloff

Political Clarity Calms Fiscal Anxiety

Comparisons to 2022 Crisis Surface but Remain Contained

Global Spillover and Broader Yield Implications

Source: Bloomberg

Chip Design Software Stocks Surge as US Lifts Export Curbs to China

US Trade Policy Shift Fuels Stock Rally

China Access Critical for EDA Leaders

Repercussions for Global Semiconductor Strategy

Source: Reuters

Euro Zone Services Sector Regains Fragile Momentum in June as Confidence Improves

Marginal Expansion Follows Prior Contraction

Composite Output Reflects Persistent Weakness

Divergence Across Euro Zone Economies

Inflation Pressures Complicate Policy Outlook

Confidence Rebounds But Lags Historical Norms

Source: Reuters

China’s Tech Giants Push for Offshore Yuan Stablecoin to Challenge Dollar Dominance

Strategic Shift in China’s Crypto Stance

Stablecoins as a Tool for Yuan Internationalisation

Hong Kong as a Launchpad for Offshore Digital Yuan

Market Dynamics Reflect a Dollar-Centric Reality

Global Regulatory Shifts Fuel Urgency

Source: Reuters

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