Asia stocks slip as US CPI fails to enthuse; dollar up
By Tom Westbrook
SYDNEY (Reuters) — Asian stocks edged towards a weekly loss on Friday and the U.S. dollar was headed for a month of gains after U.S. inflation came in steady, without the hoped-for surprise on the downside.
Soft demand at a 30-year Treasury auction and a blowout in the U.S. budget deficit last month also weighed on bonds, and their higher yields in turn pushed the dollar up — particularly against a yen pinned by yield control in Japan.
The yen touched a six-week low of 144.89 per dollar in early trade on Friday, though volumes were thinned owing to a public holiday in Japan. Its stock markets were closed and Treasuries went untraded in the Asia session.
MSCI's broadest index of Asia-Pacific shares outside Japan edged 0.2% lower and headed for a 1% weekly loss.
Headline U.S. CPI was 0.2% last month, the same as a month earlier, and the details were encouraging — with core goods inflation slowing down and only rents proving stubbornly sticky.
Yet a few hours later San Francisco Fed President Mary Daly told Yahoo Finance that while this was welcome, there «is still more work to do» for policymakers.
«I think the market was hoping with that inflation data that we'd hear Fed speakers say it's unlikely we'll have to hike any further, and the next move is a cut,» said Andrew Lilley, chief rates strategist at investment bank Barrenjoey in Sydney.
Benchmark 10-year Treasuries initially rallied on the inflation headlines, but yields were seven basis points higher at 4.11% by the close of trade in New York. Two-year yields rose two bps to 4.82%.
Thirty-year yields jumped six bps to 4.24% after a $23 billion auction landed a basis point above where the market was trading. Primary dealers were left with 12.5% of the
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