In a historic settlement agreement reached by the Biden administration on Thursday, September 21, 2023, at least $6 billion in student loans is set to be forgiven for hundreds of thousands of borrowers. However, allegations of violations from a major student loan servicer have cast a shadow over the agreement.

The settlement, approved by the Supreme Court last spring, resolved Sweet v. Cardona, a class-action lawsuit initiated against the Trump administration by student loan borrowers. The lawsuit was filed over delayed or rejected applications for the Borrower Defense to Repayment program. This program allows students to apply for loan forgiveness if they can prove their school engaged in deceptive practices.

As part of the settlement, the Education Department committed to forgive $6 billion in student loans for over 200,000 applicants who attended an institution from an approved list of schools. Additional relief measures include refunds of past payments and corrections to damaged credit reports. The department also pledged to expedite processing for other borrowers applying for the Borrower Defense program.

Since its implementation earlier this year, federal student loan debt discharge has been initiated for at least 128,000 class members, according to the Project on Predatory Student Lending, the legal group representing the borrowers.

However, controversy arose when MOHELA, a major Education Department loan servicer, was accused by the Project on Predatory Student Lending of violating the terms of the Sweet v. Cardona settlement. MOHELA allegedly informed class members that they must resume loan repayments in October, contrary to the settlement agreement which states that approved borrowers should not be required to make payments while their loans are being discharged.

The Project on Predatory Student Lending raised concerns about this issue in a letter sent to MOHELA, warning that legal action could be pursued if the collections efforts continued.

This incident with MOHELA forms part of a wider issue as student loan payments resumed following the student loan pause last month. Over 40 million borrowers are now resuming repayment, amidst numerous reported problems including long call hold times and misinformation from loan servicers. The Consumer Financial Protection Bureau, a federal agency overseeing the financial services sector, has warned student loan servicers that it is monitoring the situation closely.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

By Lucia Mutikani

WASHINGTON (Reuters) - The number of Americans filing new claims for unemployment benefits dropped to an eight-month low last week, pointing to persistent labor market tightness even as job growth is cooling.

The report from the Labor Department on Thursday also showed unemployment rolls in early September were the smallest since January. It was published a day after the Federal Reserve held interest rates steady but stiffened its hawkish stance, with a further rate increase projected by the end of the year and monetary policy to be kept significantly tighter through 2024 than previously expected.

"This economy is just not showing any sign of slowing down which hints that inflation will not be coming back down to target," said Christopher Rupkey, chief economist at FWDBONDS in New York. "The Fed was wise to keep another interest rate hike in their back pockets just in case, and it now looks like another rate hike is warranted."

Initial claims for state unemployment benefits dropped 20,000 to a seasonally adjusted 201,000 for the week ended Sept. 16, the lowest level since January. Economists polled by Reuters had forecast 225,000 claims for the latest week. Claims are in the lower end of their 194,000-265,000 range for this year.

Claims could, however, increase in the coming weeks as a partial strike by the United Auto Workers (UAW) union forces automobile manufacturers to temporarily lay off workers because of shortages of some materials.

The UAW last week launched a targeted strike against Ford (NYSE:F), GM and Stellantis (NYSE:STLA), impacting one assembly plant at each company. It has threatened to broaden the work stoppages, which for now only involve about 12,700 of the affected 146,000 UAW members.

Though striking workers are not eligible for unemployment benefits, the walkout has snarled supply chains.

Ford has furloughed 600 workers who are not on strike, while GM expected to halt operations at its Kansas car plant, affecting 2,000 workers. Chrysler parent Stellantis said it would temporarily lay off 68 employees in Ohio and expects to furlough another 300 workers in Indiana.

Unadjusted claims rose by only 67 to 175,661 last week. There were notable declines in filings in Indiana and California, which mostly offset sizeable increases in South Carolina, New York and Georgia.

Fed Chair Jerome Powell said on Wednesday that "the labor market remains tight, but supply and demand conditions continue to come into better balance."

Employment growth has been slowing and job openings falling. Labor market resilience is propping up the economy even as recession fears linger. The leading indicator, a gauge of future U.S. economic activity, fell 0.4% in August after dropping 0.3% in July, the Conference Board said in a second report on Thursday.

It has dropped for 17 straight months. Since March 2022, the U.S. central bank has raised its benchmark overnight interest rate by 525 basis points to the current 5.25%-5.50% range.

The claims data together with the Fed's hawkish stance pushed stocks on Wall street lower. The dollar gained versus a basket of currencies. U.S. Treasury prices fell, with the yield on the benchmark 10-year bond rising to a nearly 16-year high.

HOUSING FALTERING

The claims data covered the period during which the government surveyed business establishments for the nonfarm payrolls component of September's employment report.

The strike is unlikely to have an impact on payrolls as it started towards the end of the survey week. Workers most likely received pay for that week. Claims fell between the August and September survey period.

Data next week on the number of people receiving benefits after an initial week of aid, a proxy for hiring, will offer more clues on the state of the labor market in September.

The so-called continuing claims declined 21,000 to 1.662 million during the week ending Sept. 9, also the lowest level since January, the claims report showed. That suggests laid-off workers are quickly finding employment.

While the labor market remains unbowed, the housing market is faltering after showing signs of stabilizing earlier this year as mortgage rates resume their upward trend in tandem with the 10-year Treasury note, which has spiked on worries soaring oil prices could hamper the Fed's fight against inflation.

Existing home sales slipped 0.7% last month to a seasonally adjusted annual rate of 4.04 million units, the National Association of Realtors said in a third report.

Existing home sales are counted at the closing of a contract. Last month's sales likely reflected contracts signed in July, before the recent run-up in mortgage rates, which lifted the rate on the popular 30-year fixed mortgage above 7%.

Home sales last month were restrained by persistently tight supply, with inventory falling 14.1% from a year earlier to 1.1 million, the lowest on record for any August.

As a result, the median house price accelerated 3.9% from a year earlier to $407,100, the fourth-highest reading. It hit a record $413,000 in June 2022.

"The prospects for improved sales in the coming months look bleak," said Ben Ayers, senior economist at Nationwide in Columbus, Ohio. "2023 could end in a whimper for the real estate sector as any substantial pull-back in rates is likely far off into 2024."

News on manufacturing was downbeat. Manufacturing together with housing have borne the brunt of the Fed's aggressive monetary policy tightening.

A fourth report from the Philadelphia Fed showed factory activity in the mid-Atlantic region slumped in September. Firms in the region that covers eastern Pennsylvania, southern New Jersey and Delaware reported decreases in new orders and shipments. They continued to report a decline in employment.

The Philadelphia Fed's business conditions index fell to -13.5 this month from 12.0 in August. It was the index's 14th negative reading in the past 16 months.

"Softer demand for goods and higher borrowing costs are hurdles for activity," said Rubeela Farooqi, chief U.S. economist at High Frequency Economics in White Plains, New York. "But re-shoring of supply chains, infrastructure projects and a stabilization in demand could provide support to manufacturing output over time."

The Securities and Exchange Commission (SEC) has updated its regulations to require investment fund managers to clarify the relationship between their funds' names and their investment strategies. The new rule, passed on Wednesday, mandates that a fund should invest at least 80% of its assets in alignment with its name. This regulation is an enhancement from previous rules established in 2001 and aims to adapt to changes within the fund industry.

SEC Chairman, Gary Gensler, who proposed the rule change, believes this requirement will assist investors in understanding what fund marketers imply when they use terms like "big data" or "artificial intelligence" in their fund names. The rule will obligate fund prospectuses to clarify the terminology used in a fund's name and explain the criteria employed by managers to select investments that align with the name. These criteria will be incorporated into the fund's official investment policy.

The new regulation met resistance from Mark Uyeda, one of the two Republican members of the commission, who voted against it, citing it as too demanding. However, Hester Peirce, the other Republican member, supported the rule change.

The updated rule comes as a response to changes in the fund industry which include an increase in managed funds and a rise in themed funds that pursue specialized strategies. Funds focusing on environmental, social, or governance objectives are recent examples.

The regulations will take effect 60 days after publication in the Federal Register. Fund groups managing at least $1 billion will have a 12-month period to comply, while smaller fund groups will be given 18 months. Approximately 75% of funds, totaling around 10,000, will fall under these new name rules.

The rule allows for some flexibility regarding the requirement that 80% of assets align with the fund's theme. This condition applies when managers initially invest the fund's assets. However, due to fluctuations in holdings and securities prices, the SEC requires managers to review their compliance quarterly. If a fund's holdings drop below the 80% threshold, it has roughly 90 days to regain compliance. Derivatives such as swaps, options, and futures will also count towards this 80%.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

By Xie Yu

HONG KONG (Reuters) - Asian stocks followed Wall Street's lead on Thursday, dipping across the board as investors interpreted the U.S. Federal Reserve's latest policy statements as signalling higher-for-longer interest rates.

MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.4% by early afternoon Hong Kong time. Japan's Nikkei slid 0.6%. China's blue-chip dipped 0.6%, while Hong Kong's benchmark shed 1.3%.

The yield on two-year U.S. Treasury notes rose to a 17-year high of 5.1970% on Thursday morning and hovered around the 5.18% level by early afternoon.

Japan's 10-year government bond yield rose to its highest in a decade, tracking U.S. 10-year Treasury yields which rose to 4.4310%, a 16-year peak.

"We expect bond yields to see further upside in the very near term given the Fed’s hawkish position," said Tai Hui, APAC chief market strategist, J.P. Morgan Asset Management.

"However, high interest rates will eventually cool the economy, leading to falling yields," he said, adding that they remain constructive on not only long-tenor government bonds or investment grade corporate debt, but also assets like growth and tech stocks.

Ben Luk, senior multi-asset strategist at State Street (NYSE:STT) Global Markets said the overall tone of the Fed's latest meeting was not overly hawkish but there were two surprises.

Forecasts for 2024 were slightly higher than generally expected and Fed statements implied the view that macroeconomic growth would hold up even if with rates staying higher for longer, Luk said.

The U.S. central bank held interest rates on Wednesday and projected an increase by year-end, saying monetary policy is likely to be significantly tighter through 2024 than previously thought.

The median forecast for the federal funds rate is 5.1% by year-end, versus 4.6% estimated in June.

Even as inflation slows for the rest of 2023 and in coming years, the Fed anticipates only modest initial reductions to its policy rate.

Upward revisions to U.S. policymakers' median rate forecasts for the next couple of years triggered a rebound in the U.S. dollar, pushed U.S. Treasury yields to multi-year highs, flattened the yield curve and sent stocks tumbling.

The dollar index, which measures the currency against a basket of rivals, rose as high as 105.59 on Thursday, its strongest since March 9, pushing the yen close to its weakest since November.

Sterling, meanwhile, sank to fresh multi-month lows in the wake of an inflation report that surprised to the downside on Wednesday, as questions ramp up about whether the Bank of England may follow its U.S. peer in holding rates on Thursday.

Major stock futures wavered in early afternoon Asia time. U.S. stock futures, the S&P 500 e-minis, were down 0.3%. The pan-region Euro Stoxx 50 futures, German DAX futures and FTSE futures all fell by roughly 1%.

Investors are now also awaiting monetary policy decisions on Thursday from Indonesia, the Philippines and Taiwan, while a finely balanced call from the Bank of England will also give steer to Asian markets.

Oil prices fell in Asian trade on Thursday, after posting the largest fall in a month in the previous session. U.S. crude dipped 0.72% to $89.01 a barrel. Brent crude fell to $92.87 per barrel.

Gold was slightly lower, with spot gold trading at $1,927.96 an ounce.

By Engen Tham and Selena Li

SHANGHAI/HONG KONG (Reuters) -UBS has identified at least four countries, including South Korea and India, as being "slow" to grant the regulatory approvals needed to complete its takeover of Credit Suisse, an internal document reviewed by Reuters shows.

The Swiss banking giant has also highlighted Ireland and Saudi Arabia as "slow jurisdictions" in granting licences, according to the previously unreported document which was dated Sept. 6 and was circulated to UBS staff globally.

Prepared by UBS after a global review to assess the timeline of regulatory approvals necessary for the integration of Credit Suisse to complete, the document said uncooperative regulators could put transactions such as the Swiss bank deal at risk.

The document says that "a single non-cooperative regulator can jeopardise the timeline of the parent bank merger and other transactions", impacting other related integration deals.

The uncertainties could lead to winding down businesses and asset sales, when UBS faces "difficult jurisdictions or regulators", the Swiss bank said in the document.

Credit Suisse, which was Switzerland's second-biggest bank, suffered years of scandals and losses before it had to be rescued in March in a state-engineered takeover by UBS.

Although UBS completed the takeover in June, it still needs approvals from regulators in markets where both the banks operate for the legal completion of the first rescue of a global bank since the 2008 financial crisis.

A UBS spokesperson said in a statement that it was "working closely with authorities on the ongoing integration of Credit Suisse and appreciates the strong support it has received to date."

Credit Suisse declined to comment. Spokespeople for central banks in South Korea, India, Ireland, and Saudi Arabia also did not immediately respond to Reuters requests for comment.

It is normal for large merger and acquisition deals to be delayed by the myriad regulatory approvals needed to close a deal, and in very few cases transactions do get derailed due to objections raised by some regulators.

The first-ever merger of two global systemically important banks has created both opportunities and risks for UBS, which has been working on integrating Credit Suisse's businesses.

Last month UBS said it expected the takeover to be completed in 2024. The bank's internal document showed the process could be finished as soon as May next year.

'CHANGE IN CONTROL'

In South Korea, it may take up to 18 to 22 months to obtain new licences, while in Ireland the process could take up to two years, and in Saudi Arabia up to 12 months, the document said.

The regulator in India could take a minimum of six months to approve the setting up of a new branch, it added.

UBS also said in the document that for Russia, a "change in control" approval may never be obtained as this could be a politically driven decision.

In a May disclosure filed with the U.S. securities regulator, UBS said that its exposure to Russia contributed $98 million to its total emerging market exposure of $18.6 billion as of Dec. 31, 2022.

Last month, a Moscow court banned UBS and Credit Suisse from disposing of shares in their Russian subsidiaries, Reuters reported, citing court documents.

Laws introduced after Russia despatched troops to Ukraine in February last year have made presidential approval necessary for banks to cut ties with their local business, while a government commission reviews all asset transfers involving Western firms.

Russia's central bank and finance ministry did not immediately respond to requests for comment.

The majority of markets UBS and Credit Suisse operate in grant automatic transfer of all assets and liabilities, which they term universal succession, while seven of 51 jurisdictions do not recognise the practice, the document showed.

Those seven markets are Bahrain, Dubai, Abu Dhabi, Japan, Saudi Arabia, Thailand, Turkey, said the document, adding that "individual transfers are very burdensome, time-intensive and entail the risk of missing consents" in those jurisdictions.

By Kevin Buckland

TOKYO (Reuters) -The yield on two-year U.S. Treasury notes rose to a 17-year high of 5.1970% on Thursday, a day after the Federal Reserve held interest rates steady but stiffened its hawkish stance for future policy.

The 10-year yield rose to 4.4310%, a new 16-year peak.

The U.S. central bank projected a further rate increase by the end of the year and expected monetary policy to be significantly tighter through 2024 than previously thought.

Fed Chair Jerome Powell's "cautious view that a 'soft landing' is not even the base case may reflect the uncertainties of policy lag, especially alongside the possible need for more tightening," Mizuho analysts wrote in a client note.

"Against this backdrop the case for higher front-end yields, with distinct upside bias to yield volatility may persist into Q3 and early Q4," ahead of the next policy meeting in November, they wrote.

Money market traders now see better than 50% odds of a quarter-point hike by year-end, from around 40% probability before the Fed decision.

By Ann Saphir

WASHINGTON (Reuters) -Federal Reserve Chair Jerome Powell declined on Wednesday to say he expects a "soft landing" for the U.S. economy, but that sure was the picture painted by policymakers in their newest economic forecasts.

Fed officials, indeed, appear to be growing more confident than ever in being able to cool inflation without a recession or a sharp rise in unemployment.

They expect economic growth to slow next year to about 1.5%, from 2.1% this year, and for the unemployment rate to go no higher than 4.1%, the latest quarterly summary of their projections shows. That's just a smidge higher than the 4% level they see as sustainable in the long-run, and only a few tenths more than its current 3.8% level.

Just three months ago they anticipated U.S. GDP to grow only 1.1% next year, after just 1% this year, and for the unemployment rate to peak at 4.5% next year and still be there at the end of 2025.

But asked during a press conference if he would now call the soft landing a baseline expectation, Powell demurred.

"No, I would not do that," he said. "I've always thought that the soft landing was a plausible outcome...ultimately, this may be decided by factors that are outside our control at the end of the day, but I do think it's possible."

The autoworker strike, a possible government shutdown, the resumption of student loan repayments, higher energy prices, and higher long-term borrowing costs are among risks that Powell noted could affect the trajectory of the economy, inflation and, ultimately, where Fed policymakers decide they need to take rates.

ONE MORE TIME

The summary of forecasts shows most policymakers continue to expect one more interest-rate hike this year, bringing the policy rate to 5.6%, after the Fed held rates steady in a range of 5.25-5.50% on Wednesday, as widely expected.

The rosier economic picture also came with projections for fewer rate cuts next year than envisioned three months ago.

Policymakers now expect to end next year with short-term borrowing costs at 5.1%, a half percentage point higher than they anticipated in June.

The dialed-back pace of anticipated policy easing next year goes hand in hand with what policymakers expect to be uneven progress toward the Fed's 2% inflation goal, with inflation seen ending this year a little higher than projected in June.

Fed officials now see the personal consumption expenditures price index at 3.3% at year end, versus June's forecast of 3.2%, and at 2.5% by the end of next year. For 2025, they upped expected inflation slightly to 2.2% from the 2.1% projected in June, and their first look at 2026 showed them reaching their 2.0% inflation goal that year.

Fed officials expect further reductions in the policy rate as well, to 3.9% by the end of 2025 - above the 3.4% they projected in June - and to 2.9% by the end of 2026.

That would still be above the 2.5% they continue to see as the long-run neutral policy rate - the level of borrowing costs that neither slows nor stimulates a healthy economy.

The path of rates laid out in the projections is neither a plan nor a guarantee, Powell said - it's merely a best guess of what it will take to bring inflation back down to 2%.

"A soft landing is a primary objective and I did not say otherwise," Powell said. "I mean, that's what we've been trying to achieve for all this time. The real point though, is the worst thing we can do is to fail to restore price stability."

By Dharamraj Dhutia

MUMBAI (Reuters) -India's banking system liquidity deficit is at its widest in over four years ago, amid tax outflows and the lack of any major inflows, traders said on Wednesday.

Banking system liquidity deficit jumped to 1.47 trillion rupees ($17.67 billion) as on September 18, the highest single day shortfall since April 23, 2019, while banks have borrowed a record 1.97 trillion rupees from the central bank's Marginal Standing Facility window.

Advance tax payments took place last week, while outflows towards Goods and Services tax will be completed by Wednesday, with bankers estimating aggregate outflows of up to 2.50 trillion rupees.

The impact has magnified as the twin outflows have occurred in the same reporting fortnight, at a time when a chunk of the money is not available for use as it is blocked in the incremental cash reserve ratio (I-CRR).

Moreover, "another drain on rupee liquidity could be from RBI's (Reserve Bank of India) FX intervention if depreciation pressures on the rupee persist," said Gaura Sen Gupta, an economist with IDFC First Bank (NASDAQ:FRBA).

While the RBI is winding down the I-CRR, which was imposed on banks in August, this is being done in phases and is adding to the liquidity tightness, traders said.

The central bank will release 25% of the funds under I-CRR on Sept. 23 and the remaining 50% on Oct. 7, while the government's month-end inflows will start only in the last week of September.

The shortage has kept upward pressure on overnight rates, with interbank call money and TREPS rate staying in the 6.75%-6.90% band.

Upasna Bhardwaj, chief economist at Kotak Mahindra Bank, expects the RBI to keep liquidity tight in the near term in order to keep short-term rates elevated, given the pressure on the rupee and underlying inflationary risks, which may also prevent the central bank from announcing variable repo rate auctions.

The liquidity deficit will, however, narrow towards the end of this month and the beginning of October as government spending picks up and the I-CRR is completely wound down.

($1 = 83.2125 Indian rupees)

Investing.com-- Most Asian stocks fell on Wednesday with markets remaining broadly risk-off before a closely-watched interest rate decision from the Federal Reserve later in the day, while weak economic readings from Japan also weighed.

Japan’s Nikkei 225 fell 0.3% as data showed the country’s exports and imports shrank less than expected in August. But Japan’s trade deficit widened substantially more than expected, hitting a three-month low on weakness in China, which is one of the country’s biggest export destinations.

Focus this week is also on a Bank of Japan meeting on Friday, amid some speculation that a pivot away from negative interest rates is imminent. 

China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes fell 0.3% each, while Hong Kong’s Hang Seng lost 0.3% as the People’s Bank of China kept its loan prime rates unchanged, as widely expected.

The central bank has limited room to cut interest rates further and boost an economic recovery, given that rates are already at record lows. But the PBOC has also largely maintained its pace of liquidity injections to boost a slowing economic recovery. 

Weakness in China spilled over into Australia, with the ASX 200 down 0.6%. The Westpac/Melbourne Institute Leading Index- an indicator of future Australian economic growth- read 0% for August, heralding continued weakness in the Australian economy as it grapples with high interest rates and slowing Chinese demand. 

Futures for India’s Nifty 50 index pointed to a weak open, as investors continued to lock-in some profits after local stocks touched record highs this week. 

Fed angst keeps markets risk-off 

Broader markets remained largely subdued, as investors hunkered down before the conclusion of a two-day Federal Reserve meeting later in the day. 

The Fed is expected to keep rates on hold. But a recent resurgence in U.S. inflation is expected to elicit a hawkish outlook from the central bank, which could open up the possibility of at least one more rate hike in 2023.

The Fed is also expected to reiterate its stance that interest rates will remain higher for longer- a scenario that presents more headwinds for Asian markets. Rising U.S. rates  tightened monetary conditions across the globe and dried up foreign capital flows into regional markets over the past year. 

Asian chipmakers extend losses on demand fears 

Regional chipmaking stocks saw sustained losses this week, after a Reuters report showed that TSMC (TW:2330) (NYSE:TSM)- the world’s largest contract chipmaker- had asked its suppliers to delay some deliveries on concerns over slowing demand.

TSMC’s Taiwan shares fell 0.3% on Wednesday, extending losses into a third straight session.

Memory chip makers SK Hynix Inc (KS:000660) and Samsung Electronics Co Ltd (KS:005930) sank 1.2% and 0.3%, respectively, also dragging the KOSPI 0.2% lower.

Semiconductor Manufacturing International Corp (HK:0981), China’s biggest chipmaker, fell 1%, while peer Hua Hong Semiconductor Ltd (HK:1347) fell 0.6% in Hong Kong trade.

By Tom Westbrook

SINGAPORE (Reuters) - Asian stocks struggled for headway on Wednesday while 10-year U.S. Treasury yields stood at 16-year highs as surging oil prices drive inflation and set the scene for the Federal Reserve to project interest rates staying higher for longer.

Brent crude futures eased from 10-month highs overnight but at $94.26 a barrel are up 30% in three months thanks to Saudi Arabia and Russia vowing to extend output cuts.

Higher energy costs led to a bigger-than-expected spike in Canadian inflation, overnight data showed, lifting the loonie and triggering selling in the Treasury market. [US/]

Benchmark 10-year Treasury yields hit their highest since 2007 at 4.371% overnight and were last at 4.36%.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.2%, as did Japan's Nikkei. Overnight on Wall Street the S&P 500 also slipped 0.2%.

Futures pricing implies almost no chance of a Fed hike at 1800 GMT, but traders, who have begun winding back bets on cuts in 2024 and will be closely focused on the U.S. central bank's economic projections and chair Jerome Powell's news conference.

"The previous dot plot saw many participants expecting a cut in 2024. There is no reason for those dots to significantly move," said Sam Rines, managing director at research firm CORBŪ in Texas.

"The 'risk management' aspect of the Powell presser is likely to be: positive in regard to downward adjustments to the policy rate as or if inflation wanes, (but) negative with respect to threats of future tightening."

The Fed meeting leads a week jammed with central bank meetings and data over the next few days. British inflation figures are due on Wednesday, followed by central bank meetings in Sweden, Switzerland, Norway, Britain and Japan on Thursday.

STERLING STEADY AHEAD OF CPI

Foreign exchange markets have largely been in a holding pattern ahead of the Fed meeting, though the yen has continued to face pressure which early on Wednesday prompted a riposte from Japan's top financial diplomat. [FRX/]

Masato Kanda told reporters that Japanese authorities were always in close communication with U.S. counterparts and that he wouldn't rule out any options if "excessive moves persist."

The yen is down 11% on the dollar this year as expectations firm for U.S. rates to stay high and Japanese rates to stay low. The yen hit a 10-month trough of 147.95 to the dollar late last week and it traded at 147.80 early on Wednesday.

Benchmark 10-year Japanese government bonds remain hemmed around 0% but at 0.72% have been creeping towards the Bank of Japan's adjusted tolerance for yields 1% either side of zero.

The euro held steady at $1.0684. Commodity-exporters' currencies were firm, with the New Zealand dollar holding modest recent gains at $0.5940 after strong dairy price gains at an overnight auction. [NZD/]

China left benchmark lending rates unchanged on Wednesday, as expected, keeping the yuan steady at 7.2946 per dollar. [CNY/]

The Aussie held at $0.6415, while sterling has paused its slide and held at $1.2390 ahead of British inflation data due at 0600 GMT where headline CPI is seen ticking up to 7% year-on-year. [GBP/]

"The risk lies towards stronger outcomes given very strong labour earnings growth," said Commonwealth Bank of Australia (OTC:CMWAY) strategist Kristina Clifton.

"A stronger CPI result can cause financial markets to fully price in a 25 basis point hike for the Bank of England on Thursday and support sterling."

Rising yields have kept a lid on gold prices, with spot gold last trading at $1,929 an ounce. [GOL/]

Wheat prices, which had been driven down by huge shipments from Russia, steadied on expectations of dry weather cutting output in Australia and Argentina. [GRA/]