By Rae Wee

SINGAPORE (Reuters) - The dollar retreated on Friday, dragged by lower U.S. Treasury yields after a spike in weekly jobless claims raised traders' hopes that a peak in U.S. interest rates was near, as focus turned to the upcoming week packed with central bank meetings.

The number of Americans filing new claims for unemployment benefits surged to the highest in more than 1-1/2 years last week, data on Thursday showed, though layoffs are probably not accelerating as the data covered the Memorial Day holiday, which could have injected some volatility.

Nonetheless, that was enough to knock the U.S. dollar to a more than two-week low against a basket of currencies in the previous session, as investors took the data as a sign that the U.S. labour market was slowing.

The dollar index last stood at 103.35 in early Asia trade on Friday, having lost more than 0.7% in the previous session, its largest daily decline in weeks.

Against the Japanese yen, the greenback dipped to a one-week low of 138.765, tracking a slide in U.S. Treasury yields.

The benchmark 10-year Treasury yield last stood at 3.7295%, after falling 7 basis points on Thursday. The two-year yield, which typically moves in step with interest rate expectations, steadied at 4.5210%. [US/]

"We do think that the U.S., like many economies, will go through a shallow recession this year. So that'll show up in payrolls numbers and jobless claims and these sorts of numbers," said Jarrod Kerr, chief economist at Kiwibank.

Elsewhere, sterling touched a near one-month high of $1.2564, while the kiwi last bought $0.6095.

The Turkish lira tumbled more than 1% against the dollar to a record low of 23.54.

ACTION-PACKED C.BANK WEEK

Markets now turn their attention to the upcoming week which will see the Federal Reserve, the European Central Bank (ECB) and the Bank of Japan (BOJ) announce their interest rate decisions following their respective policy meetings.

The Fed takes centre stage, with money markets leaning toward a pause, though have priced in a 25% chance that the U.S. central bank delivers a 25bp rate hike.

"A slowing U.S. economy gives the Fed room to pause after 500bp of consecutive interest rate rises," said Guillermo Felices, global investment strategist at PGIM Fixed Income.

"The key question for markets is whether the Fed will just skip a hike in June and resume their tightening campaign in July."

Meanwhile, a clear majority of economists polled by Reuters expect the ECB to hike its key interest rates by 25 bps on June 15 and again in July before pausing for the rest of the year as inflation remains sticky.

The euro was last steady at $1.0782, flirting with Thursday's over two-week high of $1.0787.

The Canadian dollar last bought C$1.3365, not far from its one-month high of C$1.3321 hit on Wednesday, while the Aussie similarly stood near a roughly one-month peak at $0.6711.

Both currencies have drawn support from surprise rate increases by their respective central banks this week, which caused markets to revise their expectations for a peak in global interest rates.

By Daren Butler and Ali Kucukgocmen

ISTANBUL (Reuters) -President Tayyip Erdogan on Friday appointed Hafize Gaye Erkan, a finance executive in the United States, to head Turkey's central bank as it prepares to reverse course and tighten policy after years of rate cuts and a simmering cost-of-living crisis.

Erkan, former co-CEO at First Republic Bank (OTC:FRCB) and managing director at Goldman Sachs (NYSE:GS), takes the reins after Erdogan's re-election on May 28 and just under a week after he signalled a pivot away from unorthodoxy with a new cabinet.

The fifth central bank chief in four years, the 43-year-old replaces Sahap Kavcioglu, who spearheaded Erdogan's rate-cutting drive that set off a historic currency crash in 2021 and sent inflation to a 24-year peak above 85% last year.

The announcement of Erkan's appointment in the Official Gazette was accompanied by a decision to appoint Kavcioglu as head of the country's BDDK banking watchdog.

Erkan's leanings are unclear given she has no formal monetary policy experience in her career spanning Wall Street and U.S. corporate boardrooms. She has a Ph.D. from Princeton University in financial engineering.

She was at First Republic from 2014-2021, according to her LinkedIn profile. This year, it became the largest U.S. bank to fail since 2008 after it was seized by regulators and sold to JPMorgan (NYSE:JPM).

ORTHODOX FINANCE MINISTER

Turkey's central bank has had its independence all but stamped out in recent years by Erdogan. A self-proclaimed "enemy" of interest rates, he pressed it to deliver stimulus and was quick to replace governors.

The policy rate was slashed to 8.5% from 19% in 2021, leaving real rates deeply negative and the lira largely managed by dozens of regulations covering credit and foreign exchange.

Yet after Erdogan survived his toughest political test in the May 28 runoff vote, he on Saturday named Mehmet Simsek, a well-respected and orthodox former finance minister, as minister in charge of the economy.

Amid record low foreign reserves of -$5.7 billion, the lira has hit all-time lows this week, plunging 7.2% on Wednesday, and traded at 23.5010 against the dollar after Erkan's appointment.

Analysts said the return of Simsek and the appointment of Erkan set the stage for rate hikes, which could reattract foreign investors after an exodus in recent years.

The apparent U-turn on the economy comes as many analysts anticipate turmoil given depleted foreign reserves, unchecked inflation and wide current account deficits.

The economy's prospects depend on how much independence Erdogan grants Erkan and Simsek, analysts said. In the past, he has embraced orthodoxy, only to quickly double back.

The last central bank governor to raise rates, Naci Agbal, was fired in 2021 after less than five months on the job.

"It is unclear for how long Erdogan may tolerate a more pragmatic stance on the economic front, given the priority he assigns to the March 2024 local elections," said Wolfango Piccoli of Teneo. The ruling AK Party aims to recapture big cities from opposition control in those elections.

Erkan is on Marsh McLennan (NYSE:MMC)'s board and was named CEO at Greystone, a real estate finance and investment firm, last year.

During her career in New York City, she gained a reputation as "tough, smart, and effective," said Kathryn Wylde, CEO of the Partnership for New York City nonprofit, where Erkan once served as a director.

"She is certainly not someone who can be pushed around, but she also can disagree without being disagreeable," Wylde said.

By Leah Douglas

(Reuters) - U.S. Democrat and Republican lawmakers in a Wednesday hearing returned to the issue of work requirements for federal food aid, a major tension point during the U.S. debt negotiations that could resurface as policymakers consider critical farm legislation in the coming months.

Currently, individuals aged 18 to 49 are required to work at least 20 hours per week in order to receive benefits from the Supplemental Nutrition Assistance Program (SNAP) for more than three months over a three-year period. The debt plan signed by President Joe Biden on June 5 would raise that upper age limit to 54.

Democrats and anti-hunger groups strongly opposed the changes during negotiations, saying that work requirements are ineffective, punitive and could increase hunger in America. The final law will affect fewer people than earlier versions presented by House Speaker Kevin McCarthy.

Yet after the bill passed the House on June 1, McCarthy signaled the conversation was not over. "Let's go get the rest of the work requirements," he said in an interview.

At a nutrition-focused hearing of the House Agriculture Committee on Wednesday, Democratic members fumed about the debt plan and warned against any further changes to SNAP.

The committee, alongside its Senate counterpart, is engaged in a months-long process to pass a new farm bill, which funds U.S. farm commodity, conservation and nutrition programs like SNAP.

"Hunger should not be a political issue," said Representative Jahana Hayes, a Connecticut Democrat. "[Republicans'] obsession with cutting food assistance is jarring."

Republicans suggested, meanwhile, that the farm bill should include further SNAP reforms. During negotiations over the debt plan, Republicans argued that work requirements would encourage more low-income people to get jobs and reduce their dependence on federal aid.

The farm bill is passed every five years and is often the site of partisan tensions over nutrition spending.

About 80% of the upcoming farm bill - which the Congressional Budget Office projected in May will cost $1.5 trillion over 10 years - will be spent on nutrition programs.

By Devayani Sathyan

BENGALURU (Reuters) - The Reserve Bank of Australia (RBA) will hike its key interest rate once more by the end of September to 4.35% following a surprise hike on Tuesday and then hold policy for the rest of the year, according to economists in a snap Reuters poll.

Having paused rate increases in April, the central bank resumed tightening in June, underscoring the challenges of managing inflation.

Australian inflation fell to 7.0% last quarter but the latest monthly data showed a rise to 6.8% in April from 6.3% in March, still more than double the RBA's target range of 2-3%, suggesting it has more work to do.

Following confusion in recent months over whether rates might go higher, Governor Philip Lowe in a speech on Wednesday said "more tightening may be required", adding his "patience has a limit and (inflation) risks are starting to test that limit".

Around three quarters of economists polled, 20 of 26, forecast the RBA would hike by at least 25 basis points to 4.35% by the end of September. The remaining six forecast the cash rate to stay at 4.10%.

But nearly two thirds, 16 of 26, expect the RBA to hold fire at its next meeting on July 4, with 10 forecasting a 25 basis point rise. Markets are pricing in a slightly greater than 50% probability of a July hike.

"Given our own views about the outlook for productivity, unit labour costs and the stickiness of services inflation we continue to expect another 25 basis point increase from the RBA, most likely in August," said Adelaide Timbrell, senior economist at ANZ.

"Our forecast is August because that is when the Reserve Bank will have the fresh inflation data from the quarterly CPI report. It is possible that they'll raise earlier in July, and certainly the Reserve Bank has surprised the market before. "

Among major local banks, ANZ, CBA and NAB forecast a July pause while Westpac expects a quarter-point hike. All four saw rates peaking at 4.35% by the end of September. The RBA meets to set interest rates monthly.

The median forecast showed the cash rate at 4.35% at year-end, 25 basis points higher than the peak expected in a poll taken before the June meeting. The highest forecast was 4.85%.

Australia's economy grew 0.2% last quarter, its weakest pace in one and a half years, suggesting 400 basis points of rate increases from the RBA are beginning to restrain the economy.

But a surge in savings during the COVID pandemic and a tight labour market have made the interest rate sensitive housing market more resilient.

Home prices were expected to stagnate on average this year compared to a near double-digit fall predicted three months ago, a separate Reuters poll found.

SEOUL (Reuters) -South Korea will discuss with Japan re-establishment of their bilateral foreign exchange swap line that expired in 2015, its finance minister said on Thursday.

"Current economic issues, including bilateral and regional financial cooperation, will be discussed at the bilateral finance minister meeting on June 29," Minister Choo Kyung-ho said, adding that currency swap arrangement was also on the agenda.

Choo was speaking at a discussion forum, in response to a reporter's question about the bilateral finance minister meeting between Japan and South Korea that is scheduled to be held in Tokyo.

The meeting will mark the revival of regular dialogue between the two countries' finance ministers, which they agreed to bring back to life during their prior meeting in early May and had been suspended since 2016.

On the domestic economy, Choo said this year's economic growth would likely be "slightly lower" than the government's previous projection of 1.6%.

He said the revision would be contained in the government's economic forecast due in late June or early July, when it releases its biannual policy plans.

Meanwhile, the government is not considering a supplementary budget for this year and does not plan to do so for a while, he said.

The country's inflation, which cooled to a 19-month low in May, is likely to fall to the upper 2% level this month, but is still high and controlling it will remain as the top priority for a while, Choo said.

SEOUL (Reuters) - South Korea's finance minister said on Thursday this year's economic growth would likely be lower than the government's previous projection of 1.6%.

The government will "slightly lower" the growth forecast for this year when it releases its biannual policy plans in late June or early July, Finance Minister Choo Kyung-ho said during a media event.

The government is not considering a supplementary budget for this year and does not plan to do so for a while, Choo said.

Choo said the country's inflation, which cooled to a 19-month low in May, was still high and controlling it would remain as the top priority for a while.

TOKYO (Reuters) - Japan posted a current account surplus for the third month in April as the trade deficit narrowed and income gains from overseas investment grew, government data showed, easing worries about declines in the country's balance of payments.

The current account stood at 1.9 trillion yen ($13.58 billion) surplus in April, Ministry of Finance data showed on Thursday, beating economists' median forecast for a surplus of 1.66 trillion yen in a Reuters poll.

It followed a surplus of 2.3 trillion yen in the previous month, the data showed.

A weak yen and rises in global interest rates helped drive up primary income gains from Japanese securities investments overseas, an MOF official said.

That reflected the trend in which the country increasingly earns income from capital parked abroad rather than from sales of goods and services.

The primary income surplus stood at 3 trillion yen, more than enough to offset the trade deficit of 113 billion yen, the data showed.

Over the past year, the current account data often highlighted the pain that high energy costs and a weak yen were inflicting on Japan's economy, the world's third biggest, which relies heavily on imports of fuel and raw materials.

Japan's position as an export powerhouse has also waned in recent years, in part because companies have moved production overseas, making overseas investment a pillar of the country's earning power.

($1 = 139.9600 yen)

(Reuters) -Britain's Payment Systems Regulator (PSR) said on Wednesday it has made it mandatory for banks and payment firms to reimburse victims of online bank fraud within five days, in cases where users at a business send money to a bank account controlled by fraudsters.

Thousands of people have seen their savings swept away in recent years by an unprecedented wave of fake online bank transactions hitting Britain, called authorised push payment (APP) fraud.

The PSR said the new rules will be imposed on the Faster Payments system, where the vast majority of APP fraud has occurred so far, with the reimbursement requirements coming into force next year.

The regulator also said that all payment firms will be incentivised to take action, with both sending and receiving firms equally splitting the reimbursement costs.

"We are pleased the PSR has said it will now use its powers to compel all banks and building societies which make and receive payments over the UK's Faster Payment system to reimburse victims of APP scams when the regime goes live in 2024," Pay.UK, a retail payments firm, said in response to the regulator's decision.

The PSR last year said it planned to introduce new rules to tackle APP fraud once the parliament expands the powers of the regulator.

By David Lawder

WASHINGTON (Reuters) -The World Bank on Tuesday raised its 2023 global growth outlook as the U.S., China and other major economies have proven more resilient than forecast, but said higher interest rates and tighter credit will take a bigger toll on next year's results.

Real global GDP is set to climb 2.1% this year, the World Bank said in its latest Global Economic Prospects report. That's up from a 1.7% forecast issued in January but well below the 2022 growth rate of 3.1%.

The development lender cut its 2024 global growth forecast to 2.4% from 2.7% in January, citing the lagged effects of central bank monetary tightening and more restrictive credit conditions that were reducing business and residential investment.

These factors will slow growth further in the second half of 2023 and into 2024, but the bank released a new 2025 global growth forecast of 3.0%.

World Bank Chief Economist Indermit Gill put a gloomy spin on the new forecasts, saying that 2023 would still mark one of the slowest growth years for advanced economies in the last five decades.

Two thirds of developing economies will see lower growth than in 2022, dealing a major setback to pandemic recovery and poverty reduction and increasing sovereign debt distress, he added.

"Even by the end of next year, a third of the developing world will not beat the per-capita income levels that they had at the end of 2019," Gill told reporters. "That's five lost years for nearly a third of the world's countries."

In January, the World Bank had warned that global GDP was slowing to the brink of recession, but since then, strength in the labor market and consumption in the U.S. had exceeded expectations as has China's recovery from COVID-19 lockdowns.

U.S. growth for 2023 is now forecast at 1.1%, more than double the 0.5% forecast in January, while China's growth is expected to climb to 5.6%, compared to a 4.3% forecast in January after COVID-reduced growth of 3% in 2022.

The bank, however, halved its previous 2024 U.S. growth forecast to 0.8%, and cut China's forecast by 0.4 percentage point to 4.6%.

The euro zone got a forecast increase to 0.4% growth for 2023 from a flat outlook in January, but the forecast for next year was also cut slightly.

BANKING STRESS

Recent banking sector stress is also contributing to tighter financial conditions that will continue into 2024, the lender said.

It cited one potential downside scenario where banking stress results in a severe credit crunch and broader financial market stress in advanced economies. This would likely cut 2024 growth by nearly half to just 1.3% - the slowest pace in 30 years outside of the 2009 and 2020 recessions.

"In another scenario where financial stress propagates globally to a far greater degree, the world economy would fall into recession in 2024," the bank added.

The bank said inflation is expected to gradually edge down as growth decelerates and labor demand in many economies softens and commodity prices remain stable. But it added that core inflation is expected to remain above central bank targets in many countries throughout 2024.

By Stella Qiu

SYDNEY (Reuters) -Australia's central bank chief on Wednesday stepped up a warning of more rate hikes ahead to temper rising price pressures, even as risk of a steep economic downturn heightens with data showing GDP expanded at its weakest pace in 1-1/2 years last quarter.

Reserve Bank of Australia Governor Philip Lowe said the assessment of inflation risks has changed in the past few months since it paused a months-long policy tightening campaign in April, including upside surprises on wages, housing prices and persistently high services inflation.

"We have been prepared to be patient... but our patience has a limit and (inflation) risks are starting to test that limit," Lowe said in a speech at the Morgan Stanley (NYSE:MS) Australia Summit in Sydney, a day after the central bank raised the benchmark cash rate a quarter point to an 11-year high of 4.1%.

"We couldn't just sit idly and say well this is just all accidental. It's all just noise."

Lowe reiterated that further tightening may still be required to bring inflation to heel, with some analysts now expecting rates to peak at 4.6% while Goldman Sachs (NYSE:GS) is picking 4.85% - well above a 4.35% peak projected by many banks just weeks earlier.

The RBA has projected headline inflation - which is at about 7% now - to return to the top of the bank's target of 2%-3% by mid-2025, a slower path than many other economies as Lowe wants to preserve strong gains in the labour market.

However, the RBA chief said that "the desire to preserve the gains in the labour market does not mean that the Board will tolerate higher inflation persisting," raising the risk of a hard landing for the economy.

Gross domestic product (GDP) data earlier on Wednesday showed the Australian economy expanded 0.2% in the first quarter, its weakest pace since the third quarter 2021 when COVID lockdowns paralysed activity. That missed analysts' forecast of 0.3% growth.

PRODUCTIVITY, PRICE CHALLENGE

Price pressures have led the RBA to raise its cash rate by 400 basis points since last May, the most aggressive tightening campaign in its modern history.

Markets now see rates are almost certain to reach 4.35% by September, and a hike could come as soon as next month.

That could further hamper drivers of economic growth.

In the last quarter, for instance, GDP growth was underpinned by business investment, which analysts expect to slow from here. Also, Australian consumers, squeezed by high costs of living and rising interest rates, have cut back on discretionary spending, making just a 0.1 percentage points contribution to first quarter GDP growth.

"On the face of it, that would suggest the RBA could well take its foot off the brake. However, we're not convinced," said Marcel Thieliant, a senior economist at Capital Economics.

"Dismal productivity gains raise the risk that the RBA will have to raise interest rates above the 4.35% peak we have pencilled in."

A productivity measure showed GDP per hour worked fell 0.3%, while compensation of employees (COE), the broadest measure of economy-wide labour costs, increased 2.4% in the first quarter, after a rise of 2.0%.

On Wednesday, Lowe elaborated on four areas that the board would be paying close attention to in upcoming policy decisions - global economy, household spending, growth in unit labour costs and inflation expectations.

Services price inflation remained high, with rents rising quickly and electricity prices set to increase further, while unit labour costs are rising briskly without a pickup in productivity, and medium-term inflation expectations could start to shift higher, said Lowe.

"It is in Australia's interest that we get on top of inflation and we do so before too long. The Board will do what is necessary to achieve that."