Yen Steady as Investors Eye Japan’s Bond Auction and Global Fiscal Strains Intensify

Economic

Forex

Summary:

The yen held stable while markets awaited Japan’s long-term bond auction, amid concerns about rising yields and global fiscal health. Meanwhile, the U.S. dollar remained firm, buoyed by strong economic data and easing tariff tensions....

Yen Stability Reflects Market Caution Before Key Bond Auction

In early Wednesday trading, the Japanese yen hovered around 144.345 per dollar, showing minimal change after a sharp 1% drop the day before. The move came amid expectations that Japan might reduce issuance of its super-long bonds following a significant yield spike. Investor focus now turns to the upcoming auction of Japan’s longest-tenor government bonds, which is being viewed as a barometer of confidence in the country’s debt sustainability.

Bond yields in Japan have experienced notable volatility, with long-end yields hitting record highs last week after a disappointing 20-year auction. On Wednesday, yields edged higher again after a sharp drop in the previous session, reflecting persistent concerns about the country’s fiscal outlook.

Investor Sentiment and Policy Uncertainty

Analysts remain cautious about Japan’s fiscal trajectory, particularly ahead of the national elections in July. According to Charu Chanana of Saxo, demand for long-dated bonds may remain weak, regardless of auction outcomes, due to policy ambiguity from the Bank of Japan and fiscal pressures. For the yen, this translates to two-way risk: haven flows continue to support strength, while clearer trade policy signals from the U.S. could limit further gains.

So far in 2025, the yen has appreciated by nearly 9%, largely due to risk-off sentiment and the depreciation of the U.S. dollar under President Trump’s erratic trade policies. However, further upward momentum remains constrained by domestic yield pressures and global sentiment shifts.

U.S. Dollar Holds Firm on Economic Optimism

The dollar index held at 99.574, as the greenback maintained strength after a strong finish to the previous session. This was driven by better-than-expected consumer confidence data and the White House’s decision to delay EU tariffs, which temporarily eased trade tensions. The euro remained flat at $1.1325 after a previous 0.5% decline, while sterling traded at $1.3516, still near its three-year high despite fiscal concerns weighing on UK debt.

U.S. Treasury yields also climbed modestly, recovering from earlier declines linked to weak demand at recent auctions. Rising fiscal deficits in the U.S. have attracted scrutiny, especially following Moody’s downgrade of the U.S. credit rating and soft long-bond auction performance. These developments are reinforcing investor focus on sovereign debt sustainability across major economies.

Asia-Pacific Currencies Mixed Ahead of Rate Decisions

In the Asia-Pacific region, the Australian dollar remained subdued at $0.6443, one week after the Reserve Bank of Australia cut interest rates by 50 basis points. Meanwhile, the New Zealand dollar traded slightly lower at $0.5941, ahead of a widely anticipated 25 basis point rate cut by the RBNZ, reflecting global monetary easing trends.

As investors digest the complex interplay of domestic policy uncertainties, bond market volatility, and global fiscal risks, the yen’s steadiness masks deeper fragilities in Japan’s economic positioning. With long-dated bond yields under pressure and fiscal worries gaining traction globally, markets are entering a phase of heightened sensitivity where currency and bond movements reflect broader macroeconomic tensions. The upcoming bond auction in Japan may serve as a pivotal signal for both yen dynamics and investor confidence in sovereign debt markets.

Source: Reuters

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Economic

RBNZ Delivers Sixth Consecutive Rate Cut

On May 28, 2025, the Reserve Bank of New Zealand reduced its Official Cash Rate (OCR) from 3.5% to 3.25%, marking its sixth consecutive cut since mid-2024. This move reflects the central bank’s response to sluggish domestic growth and escalating external risks, despite inflation remaining within its target range of 1% to 3% at 2.5%. The decision aligns with market expectations and highlights the central bank’s proactive stance in shielding the economy from external volatility.

The RBNZ's updated projections signal a continued easing path, with the OCR forecast to decline to 2.92% by Q4 2025 and 2.85% by Q1 2026. However, the decision to cut was not unanimous—one of the five Monetary Policy Committee members voted to hold rates steady at 3.5%, suggesting some caution within the board. This division reflects a balancing act between maintaining policy flexibility and responding decisively to global and domestic pressures.

External Headwinds and Policy Response

Global economic uncertainty, particularly regarding U.S. trade policy and ongoing geopolitical tensions, has been weighing on New Zealand’s export-dependent economy. Though the country emerged from its 2024 recession, growth remains sluggish, exacerbated by fiscal constraints and weak consumer confidence. The RBNZ emphasized that these global dynamics are impacting local demand and justifying continued monetary support.

Following the rate cut, the New Zealand dollar remained relatively stable, indicating that financial markets had already priced in the move. Analysts expect at least one more rate cut later this year, provided inflation continues to moderate and external risks persist. The central bank’s dovish tone reinforces the expectation that monetary policy will remain accommodative for the foreseeable future.

New Zealand’s latest rate cut underscores the Reserve Bank’s commitment to supporting economic stability amid a fragile global environment. While inflation is currently under control, the RBNZ is prioritizing growth and resilience, preparing to take further action if needed. This signals a clear shift toward more aggressive monetary easing to buffer the economy against mounting international headwinds.

Source: Reuters

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Economic

An Overcrowded Market Reaches a Breaking Point

The Chinese auto industry, already the world’s largest by volume, is reaching a critical stress point. BYD, one of the country's top electric vehicle (EV) makers, recently slashed prices across over a dozen models, including its entry-level Seagull, now priced at just 55,800 yuan ($7,765)—a sharp drop from nearly $10,000. This move signaled a deeper shift in pricing dynamics and set off alarm bells across the industry.

The price war, which has been intensifying over the past three years, has led to a fierce race to the bottom. Many automakers, especially startups and niche players, are facing unsustainable financial pressure. Tu Le of Sino Auto Insights described the current trajectory as a “bloodbath in the making,” pointing to companies like Neta and Polestar that may not withstand another wave of markdowns.

Investor Confidence Drops as Market Volatility Rises

The market’s response has been swift. BYD’s shares plunged by 8.6% in Hong Kong, while Geely dropped 9.5%. Other EV stocks such as Nio and Leapmotor recorded declines between 3% and 8.5%. These losses reflect growing investor anxiety about deteriorating margins and the long-term viability of smaller players. The comparison made by Great Wall Motors’ chairman between the current state of China’s car industry and the collapse of property giant Evergrande further underscored the gravity of the situation.

Adding to the market strain is the growing trend of labeling unsold new cars as “used” to artificially boost sales numbers and meet aggressive sales targets. According to sources reported by Reuters, this practice is now under investigation by Chinese regulators, indicating that the industry’s problems are attracting state attention and may trigger more regulatory interventions.

Structural Weaknesses and Supplier Risks

Wei Jianjun, chairman of Great Wall Motors, has been vocal about the systemic risks to the supply chain. He highlighted that price reductions of up to 100,000 yuan on some models are jeopardizing supplier sustainability and undermining product quality. As manufacturers push for ever-lower prices, suppliers are being squeezed, increasing the likelihood of bankruptcies within the broader automotive ecosystem.

China currently has 169 automakers, yet more than half of them control less than 0.1% of the market share. The resemblance to the early U.S. auto industry, when consolidation followed an era of excess competition, suggests a similar correction may be imminent. However, despite years of predictions about consolidation, the sector has only grown more fragmented as tech giants like Xiaomi and Huawei continue to enter the fray, bringing fresh capital and competition.

Shifting Consumer Expectations and Shrinking Margins

The erosion of pricing power has been accelerated by a rapid commoditization of advanced vehicle features. Technologies like driver-assist systems, once premium offerings, are now bundled into base models. This shift narrows profit margins further and makes it harder for companies to differentiate based on innovation alone. Competitive advantages are diminishing, forcing automakers into a volume-based strategy that few can survive without scale.

China’s central planners have taken note. A recent warning from state authorities cautioned that overly aggressive pricing, especially selling below cost, risks distorting market competition and threatening industry sustainability. This signals a possible policy pivot aimed at restoring order and fairness in the marketplace, though how such guidance will be enforced remains uncertain.

The current pricing spiral in China’s auto industry reflects more than just competitive zeal—it signals a structural challenge rooted in overcapacity, regulatory gaps, and unsustainable business models. While BYD’s price cuts may push some firms out of the market, they could also catalyze another wave of entrants, further crowding an already saturated space. Without decisive consolidation and regulatory realignment, the industry risks prolonged instability where short-term market share comes at the cost of long-term resilience.

Source: CNBC

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Daily News

[Quick Facts]

1. Trump administration expects to get "golden shares" of U.S. Steel as strings attached to Nippon Steel merger

2. Mexico will begin a review of the U.S.-Mexico-Canada trade deal in late September or early October

3. Iranian Foreign Ministry: Iran will not compromise on uranium enrichment rights

4. Trump administration calls for termination of all remaining federal contracts at Harvard University

5. Debt ceiling pressure intensifies as U.S. Treasury cuts Treasury issuance

6. U.S. Consumer Confidence posts biggest increase in four years

7. Lane: A significant interest rate cut is unlikely even if inflation falls further

8. U.S. home price gains slowed in March, but buyers in supply-strapped areas remain deep in bidding wars

[News Details]

Trump administration expects to get "golden shares" of U.S. Steel as strings attached to Nippon Steel merger

The U.S. government is expected to secure a "golden share" right from U.S. Steel as a condition for regulatory approval of Nippon Steel's acquisition of the company. This arrangement, according to sources, would grant the U.S. government a de facto veto over specific corporate decisions. Last Friday, Trump announced a "partnership" between Nippon Steel and U.S. Steel, including US$14 billion in new U.S. investments. The precise scope of this veto power remains undefined, and it is unclear whether the government has decided on the US$14.1 billion acquisition. Sources indicate that the transaction proposal submitted to the Committee on Foreign Investment in the United States (CFIUS) and the President includes the initial all-cash offer of US$55 per share, along with the additional US$14 billion investment.

Mexico will begin a review of the U.S.-Mexico-Canada trade deal in late September or early October

Mexican Economy Minister Marcelo Ebrard announced on Tuesday that Mexico anticipates the formal commencement of the scheduled review of the trilateral trade agreement with the United States and Canada in early Q4 of this year. The United States-Mexico-Canada Agreement (USMCA), negotiated during the first term of U.S. President Trump, replaced the North American Free Trade Agreement (NAFTA) in 2020 and mandates a joint review by the three nations after six years. Ebrard previously indicated his expectation for the review to begin in the latter half of this year, ahead of the original schedule. Trump has consistently advocated for the renegotiation of the agreement, seeking improved trade terms with all commercial partners.

Iranian Foreign Ministry: Iran will not compromise on uranium enrichment rights

According to a report from the Islamic Republic News Agency on the 27th, Iranian Foreign Ministry spokesperson Baghaei stated that Iran will not relinquish its right to uranium enrichment under any circumstances. Baghaei, in an interview with CNN in Tehran on the 26th, indicated that an agreement between Iran and the U.S. would be straightforward if the U.S. aimed to ensure the non-weaponization of Iran's nuclear program. However, he cautioned that talks would be "problematic and could seriously jeopardize the entire negotiation process" if the U.S. intended to deny Iran's right to peaceful nuclear energy. He reiterated Iran's commitment to the exclusively peaceful nature of its nuclear program.

Trump administration calls for termination of all remaining federal contracts at Harvard University

Multiple U.S. media outlets report that the Trump administration issued a letter on the 27th to federal agencies, mandating the termination of all remaining federal contracts with Harvard University, totaling approximately US$100 million. The New York Times, citing anonymous government officials, reported that the letter was disseminated by the U.S. General Services Administration and delivered to federal agencies on the same day. This action is the latest in a series of measures by the Trump administration aimed at diminishing Harvard's financial standing and global influence, thereby curbing the university's cultural impact. According to a copy of the letter obtained by NBC News, federal agencies are required to submit a list of contracts terminated with Harvard University to the General Services Administration by June 6.

Debt ceiling pressure intensifies as U.S. Treasury cuts Treasury issuance

The U.S. Treasury has reduced the auction sizes for four-week and eight-week Treasury bills, potentially initiating a series of cuts to preserve borrowing capacity under the statutory debt ceiling. On Tuesday, May 27, the Treasury announced plans to issue US$75 billion in four-week bills on Thursday, a decrease of US$10 billion from the previous offering. Additionally, the Treasury will issue US$65 billion in eight-week bills, also a US$10 billion reduction from the prior auction. The Treasury maintained the US$60 billion offering of 17-week bills scheduled for Wednesday.

U.S. Consumer Confidence posts biggest increase in four years

U.S. consumer confidence rebounded sharply in May from a near five-year low, driven by improved public perceptions of the economic and labor market outlook following a temporary truce on tariffs. Data released Tuesday by the Conference Board showed the Consumer Confidence Index rose 12.3 points to 98, the largest monthly increase in four years. Economists surveyed by Bloomberg had a median expectation of 87.1. The expectations index, which reflects consumers' outlook for the next six months, recorded its largest increase since 2011, while the present situation index also rose. This improvement in confidence was seen across all age groups, income brackets, and political affiliations, with the most significant gains among Republicans.

Lane: A significant interest rate cut is unlikely even if inflation falls further

ECB Chief Economist Philip Lane stated that while most indicators suggest a continued decline in Eurozone inflation, certain factors could exert upward pressure, including EU-US tensions and potential trade negotiation failures. When questioned about the implications for monetary policy, Lane indicated, "We need to find a middle ground." He added, "If we see further signs of declining inflation, we will respond with further rate cuts." However, the scope of discussion remained limited, with no consideration given to substantial rate reductions. "We are in a normal central bank policy area."

U.S. home price gains slowed in March, but buyers in supply-strapped areas remain deep in bidding wars

The U.S. housing market experienced a deceleration in price appreciation in March, accompanied by an increase in available inventory, although buyer demand remained subdued. According to the S&P CoreLogic Case-Shiller index, the national home price index rose 3.4% year-over-year, a decrease from the 4% annual increase observed in February. Elevated housing prices since the onset of the pandemic, coupled with mortgage rates hovering around 7%, have constrained affordability, leading to a decline in purchasing activity. Concurrently, housing supply is expanding across numerous regions. Sellers are more inclined to offer concessions due to reduced competition from prospective buyers. Bidding wars persist in areas with constrained supply. Among the 20 major cities, New York recorded the highest year-over-year price increase at 8%. Chicago and Cleveland saw gains of 6.5% and 5.9%, respectively. Tampa, Florida, led the declines with a 2.2% decrease.

[Today's Focus]

UTC+8 10:00 RBNZ May Interest Rate Resolution

UTC+8 11:00 RBNZ President Orr Holds Monetary Policy Press Conference

Pending 39th Ministerial Meeting of OPEC and Non-OPEC Countries Kicks Off

Pending Vice President Vance Speaks at Bitcoin 2025 Conference

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Gerik

Economic

Stocks

Trump’s Tariff Delay Sparks Strong Market Rebound

Wall Street ended the day with a broad-based rally after President Donald Trump announced a delay in his proposed 50% tariffs on the European Union, now scheduled for July 9. This decision gave markets a sense of temporary relief, reversing fears that trade tensions would escalate abruptly. The move signaled a potential window for renewed negotiations between the U.S. and EU and came after months of volatility driven by Trump’s unpredictable trade policy shifts.

The Dow Jones Industrial Average surged by 1.78% to 42,343.65, the S&P 500 climbed 2.05% to 5,921.54, and the Nasdaq Composite soared 2.47% to 19,199.16. The strong performance marked a clear reversal from earlier months, where erratic tariff threats had pushed the S&P 500 nearly 19% below its February peak.

Investor Behavior in Response to Political Signals

The sudden shift in sentiment reflects investors' evolving approach to Trump’s tariff tactics. As described by market strategist Paul Nolte, traders are increasingly interpreting Trump’s threats as negotiation tactics rather than definitive policy shifts. This shift in perception reduces the market’s vulnerability to sharp selloffs from tariff announcements and introduces more calculated risk-taking based on expected reversals.

Another key driver of Tuesday’s rally was a sharp 14.4% increase in current-month consumer confidence, signaling strong household sentiment despite weak capital goods orders. This divergence suggests that while corporate investment may be softening, consumer demand remains a powerful pillar of growth. With domestic consumption accounting for a significant share of U.S. GDP, this rebound in confidence supports short-term economic resilience.

On the policy front, comments from Richmond Fed President Thomas Barkin reinforced expectations that the Federal Reserve will hold interest rates steady until the economic effects of tariffs become clearer. His remarks aligned with a broader consensus among Fed officials who are wary of tightening policy amid trade-related uncertainty.

Sector Performance and Market Breadth

All eleven sectors of the S&P 500 closed higher, with consumer discretionary and tech leading gains. The "magnificent seven" tech momentum stocks pushed the Nasdaq to outperform. Notably, semiconductor shares also surged ahead of Nvidia’s quarterly earnings report, where analysts expect a 66.2% increase in revenue and a 43.5% jump in earnings per share year-over-year.

Airlines and large-cap growth stocks also led gains, reflecting investors’ renewed interest in cyclical and high-beta segments. Meanwhile, Temu-parent PDD Holdings fell 13.6% after missing revenue estimates and reporting a 47% drop in quarterly profit, contrasting with the upbeat tone of the broader market.

Market Internals Confirm Strong Breadth

Market internals reinforced the bullish trend. Advancers outpaced decliners by more than 5-to-1 on the NYSE and over 2.5-to-1 on the Nasdaq. The S&P 500 posted 24 new 52-week highs with no new lows, suggesting broad strength and a technical recovery from recent declines. Trading volume remained slightly below average but still robust, indicating strong participation in the rally.

Tuesday’s rally illustrates how sensitive U.S. equity markets remain to political developments and consumer sentiment. The temporary tariff reprieve and strong consumer confidence data provided a dual boost, overshadowing weaker investment indicators and geopolitical uncertainty. While the delay in tariffs suggests potential for improved trade diplomacy, market sustainability will depend on the credibility of future policy signals and the strength of underlying economic data.

Source: Reuters

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Hannah Ellis

French President Emmanuel Macron will meet his Indonesian counterpart Prabowo Subianto in Jakarta on Wednesday, and defence ties with Paris' biggest arms client in Southeast Asia are expected to be on the agenda.

Indonesia is the second leg of Macron's regional trip after Vietnam, where the two countries signed deals worth over $10 billion. He is scheduled to fly to Singapore on Thursday.

Indonesia's foreign ministry said the two sides would discuss "existing strategic partnerships," without giving specific details about the areas of discussion.

In 2022, the two countries signed an $8.1 billion defence deal that included an order for 42 Rafale fighter jets made by France's Dassault Aviation (AM.PA), opens new tab, as well as a series of agreements including submarine development and ammunition.

"Some commitments need follow-up and Indonesia has shown interest in some other military hardware, but there has been no progress yet," said Khairul Fahmi, a military expert at Indonesia-based Institute for Security and Strategic Studies.

No Rafale jets have been delivered to Indonesia yet. The chief of the Indonesian Air Force Mohamad Tonny Harjono said in February that six jets would arrive in Indonesia in early 2026, state news agency Antara reported.

Aside from the Rafale deal, Indonesia in 2024 struck an agreement with French state-owned shipyard Naval Group to buy two "Scorpene" submarines, and in 2023 announced the purchase of 13 long-range air surveillance radars from France's Thales.

Prabowo, who became president last year, was the defence minister when these deals were signed.

Macron's delegation to mineral-rich Indonesia includes French mining group Eramet's new CEO Paulo Castellari. Eramet (ERMT.PA), opens new tab chairwoman Christel Bories said they would look to discuss mining permits in relation to the Weda Bay nickel mine.

Indonesia is the world's largest producer of nickel, and also holds the biggest known reserves of the metal. Eramet and other companies have complained about reduced volume allowances.

The group also has been in talks with Indonesia's new sovereign wealth fund, Danantara, about battery supply-chain investments, with Eramet still wanting to get into nickel processing after dropping a plan to build a plant with BASF last year.

Reporting by Ananda Teresia and Stanley Widanto in Jakarta, and Gus Trompiz in Paris; Writing by Gibran Peshimam; Editing by John Mair

Source: Reuters

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Michelle Reid

Key Points:

● Bitcoin reached $111,980, a new all-time high.

● Strong institutional investment marked the surge.

● Economic policies may influence future fluctuations.

Bitcoin Surpasses $110,000 Amid Market Momentum

Bitcoin surpassed the $110,000 mark on May 26, 2025, amid strong trading activity and macroeconomic factors.

The event boosts Bitcoin's stance as a dominant cryptocurrency, while experts remain attentive to potential fluctuations due to global economic conditions.

Bitcoin's price movement to $110,000, a critical psychological level, occurred after it dipped to $106,000 on May 25. Strong institutional support led by key players, like Michael Saylor, who said, "Bitcoin is an unparalleled store of value that continues to gain traction among institutional investors," has been instrumental in this achievement, highlighting his fervent advocacy for Bitcoin as a store of value. The current US President's delay in implementing tariffs on the EU appears correlated with the price increase.

Financial markets witnessed a surge with digital asset inflows reaching $3.3 billion weekly, supporting Bitcoin's climb. Institutional investments fuel growth while market analysts project support for a move toward $115,000. The cryptocurrency market experienced over a 2% rise as a result of these factors, signaling continued confidence.

The situation's implications involve potential economic and financial shifts influencing prices. Bitcoin's upward trajectory may affect investor decisions globally. Long-term holder accumulation and Bitcoin ETFs were instrumental in this price increase, with predictions suggesting recently established support could push prices to higher targets.

Experts caution that if institutional inflows slow or regulatory pressures mount, a price correction below $110,000 may occur. Continued market interest and technical analyses suggest maintaining current levels could solidify future growth trends.