By Leika Kihara

TOKYO (Reuters) -The Bank of Japan cut its economic assessment for seven of the country's nine regions on Thursday, but said the economies were mostly picking up or recovering gradually.

In a report on regional economies, the central bank said there was hope that smaller firms would hike wages by the same amount as last year or more, after bumper pay hikes were offered to employees by their bigger counterparts.

"With strong wage hikes sustained for two straight years, companies are changing their behaviour to cope with rising labour costs," such as boosting investment to streamline operations, the BOJ said.

The BOJ, however, warned of weak signs in consumption and output in some regions which were hit by sluggish winter clothing sales and auto production disruptions, underscoring the fragile nature of Japan's economic recovery.

By Anant Chandak

BENGALURU (Reuters) - India's dominant services industry grew faster in March amid strong demand, according to a private business survey that also showed employment increased at the fastest rate in seven months and export business expanded at a record pace.

The final HSBC India Services Purchasing Managers' Index, compiled by S&P Global, rose to 61.2 last month from February's 60.6, confounding a preliminary reading for a fall to 60.3.

That put the reading above the 50-mark separating growth from contraction for a 32nd consecutive month.

"India's services PMI rose in March, following a small dip in February, on the back of strong demand that spurred sales and business activity," said Ines Lam, economist at HSBC.

While buoyant domestic demand and favourable economic conditions drove up new business, exports jumped at the quickest pace since the sub-index was included in the survey in September 2014.

That encouraged firms to increase hiring at the fastest rate since August. That is good news for a country with millions of entrants to the workforce every year.

The outlook for the coming year remained optimistic, although last month's reading showed the future activity sub-index had slipped to a four-month low as there were some concerns surrounding competitive pressures.

Rising input costs coupled with robust demand led firms to pass on the increase to clients, resulting in prices charged climbing at the strongest rate since July 2017.

"Input costs rose at a faster rate, yet service providers were able to broadly maintain margins by charging higher output prices," added Lam.

High prices could mean the Reserve Bank of India would keep its repo rate at 6.50% for a longer period.

Faster expansion in services activity, alongside a manufacturing industry growing at the fastest pace in 16 years in March, pushed the HSBC final India Composite PMI Index to an eight-month high of 61.8 from the previous month's 60.6 and higher than a preliminary reading of 61.3.

By Tom Westbrook

SINGAPORE (Reuters) - The dollar was pinned beneath recent peaks on Thursday with traders taking remarks from Federal Reserve Chair Jerome Powell as reassuring on the likelihood of interest rate cuts this year while waiting for the latest U.S. labour market readout.

An unexpected slowdown in U.S. services growth also supported cut expectations and weighed on the dollar, though for the year so far it remains the best-performing G10 currency as those expectations are far more modest than three months ago.

The yen, which has been frozen lately by the risk of official intervention, hardly enjoyed much relief either, and at 151.56 was more or less where it has been for three weeks.

The euro, up 0.6% overnight, was back to the middle of a range it has kept for a year at $1.0837. European inflation came in softer-than-expected on Wednesday, reinforcing expectations for a European rate cut in June.

Jerome Powell made balanced remarks noting policymakers will be guided by economic data. Traders focused on his view that recent figures had not changed his broad outlook, and his reminder that "most FOMC participants see it as likely to be appropriate to begin lowering the policy rate at some point this year."

"The speech broadly affirmed the Fed is on track to cut rates this year, with data determining the timing. We think by July, the (Fed) will likely have sufficient confidence to begin cutting rates," said analysts at ANZ.

Futures pricing was broadly steady and implied markets see about a 60% probability of a Fed cut in June.

The Australian dollar broke above its 200-day moving average as the U.S. dollar dipped overnight and was steady at $0.6568 on Thursday.

The Aussie is at a five-month high on the New Zealand dollar with traders expecting New Zealand rate cuts beginning in August but Australian rates on hold until November. [AUD/]

The New Zealand dollar rose 0.7% on the greenback overnight to regain a foothold above $0.60. It was last trading at $0.6013. Sterling bought $1.2645 - also in the middle of a range it has kept since December. [GBP/]

Chinese markets were closed for a holiday.

The U.S. dollar index, up 2.8% this year as market expectations for more than 160 basis points of U.S. rate cuts have been sliced in half, was last at 104.22. It made a four-and-a-half-month high of 105.10 on Tuesday.

U.S. Treasury yields, which shot up earlier in the week, retreated slightly overnight. [US/]

PMI readings are due in Europe later on Thursday, as is the readout from last month's European Central Bank meeting. The major focus for the rest of the week will be on U.S. labour data due on Friday.

(Reuters) - The Federal Reserve should not cut its benchmark interest rate until the end of this year, Atlanta Fed President Raphael Bostic said on Wednesday, as he maintained his view that the U.S. central bank should reduce borrowing costs only once over the course of 2024.

"We've seen inflation kind of become much more bumpy," Bostic said in an interview with broadcaster CNBC. "If the economy evolves as I expect and that's going to be seeing continued robustness in GDP and employment, and a slow decline in inflation over the course of the year, I think it will be appropriate for us to start moving down at the end of this year, the fourth quarter."

The Fed held rates steady in the 5.25% to 5.5% range last month, with most policymakers still expecting at least three rate cuts this year, but its new projections reflected slower progress on inflation and continued robust economic growth and employment.

Two other Fed policymakers in separate appearances yesterday maintained their forecasts for three rate cuts. Fed Chair Jerome Powell is set to speak later on Wednesday.

Bostic said that any weakening in the economy was incremental and once again highlighted his concerns that some secondary measures in the inflation numbers are much higher than they were before.

"I've got to make sure those are not hiding some extra upward pricing pressure before I'm going to want to move our policy rate," Bostic noted. He now expects inflation to drop incrementally through 2024 and 2025 with the 2% target rate reached "sometime in early 2026."

Inflation by the Fed's targeted measure was 2.5% in February, far below its mid-2022 peak of around 7% but still above the 2% goal, with progress slower so far this year than for much of last year.

"If that trajectory slows down, in terms of inflation, then we are going to have to be more patient than I think many had expected," Bostic said.

Investing.com-- Recent economic indicators suggest that the Chinese economy picked up pace in recent months, putting the country on track to potentially achieve the government’s annual 5% gross domestic product target, Citi analysts said in a note.

Citi had recently upgraded its GDP growth forecast for China to 5%- bringing it in line with Beijing’s outlook, and said in a note this week that recent positive purchasing managers index data from the country reinforced this view.

Citi analysts also forecast some improvements in upcoming economic readings for March, including trade data, industrial production, fixed capital expenditure and lending activity. 

Official PMI data showed last week that China’s manufacturing sector returned to growth in March, while non-manufacturing activity picked up. This data was complemented by private PMI surveys showing improvements in both manufacturing and services activity. 

“We expect GDP growth to hit 5.1%YoY in 24Q1E, well on track to the ~5% growth target this year. The monthly indicators could continue to show the entrenched dual-tracked pattern,” Citi analysts wrote in a note. 

Still, they noted that export growth could turn negative in March due to a higher base for comparison from the prior year. But overseas demand is expected to have improved, especially as recent PMI data showed an improvement in export orders. 

Citi analysts said they expected social financing to pick up in March from the prior month, but that the improvement would likely be middling. 

But on the other hand, headwinds from the property market are expected to continue, while China’s deflationary trend is widely expected to persist. While the Lunar New Year holiday helped spur some consumer spending in the January-February period, this boost is likely to have run out in March, especially amid softer food prices.

Producer price inflation is also expected to remain largely in contraction, Citi analysts said. 

While China’s economy showed some signs of improvement so far in 2024, it still has a long road back to pre-COVID growth levels. Government reluctance towards rolling out more stimulus measures has also left investors clamoring for more. 

By Ann Saphir and Michael S. Derby

(Reuters) -A pair of Federal Reserve policymakers often considered to have divergent monetary policy leanings on Tuesday both said they think it would be "reasonable" to cut U.S. interest rates three times this year, even as stronger recent economic data has sown investor doubts about that outcome.

Cleveland Fed Bank President Loretta Mester and San Francisco Fed Bank President Mary Daly last month joined the U.S. central bank's unanimous vote to leave short-term interest-rates in the 5.25%-5.5% range to keep putting downward pressure on inflation.

"At this point, the economy and policy are in a good place," Daly said at an event in Las Vegas. "Inflation is coming down, but it's slow, it's bumpy and slow. The labor market is still going strong and growth is going strong. So there's really no urgency to adjust the rate."

Projections published at the Fed's March meeting showed the typical policymaker expected to deliver three quarter-point interest rate cuts this year, though nearly half of officials - nine of the 19 - see two or less this year, according to forecasts issued last month.

"I think that is a very reasonable baseline," said Daly, often pegged as dovish though a self-described policy centrist.

Still, Daly said, there is a "real risk" of cutting rates too soon and locking in the "toxic tax" of too-high inflation.

Mester, on the more hawkish end of the Fed's policy spectrum, told reporters on Tuesday that three rate cuts for this year remain a "reasonable" forecast while deeming it a "close call."

Though, like Daly, she acknowledged the risk of keeping rates high for too long and unnecessarily harming the labor market, "at this point, I think the bigger risk would be to begin reducing the funds rate too early," Mester said at an event in Cleveland.

Inflation by the Fed's targeted measure was 2.5% in February, far below its mid-2022 peak of around 7% but still above the 2% goal, with progress slower so far this year than for much of last year. Meanwhile the labor market has been strong, with unemployment at 3.9% in February.

Data this week showed manufacturing unexpectedly rebounding, with a rise in raw materials prices raising fears that inflation could resurge.

Investors are eager to hear how Fed Chair Jerome Powell, speaking at Stanford University on Wednesday, adds it all up. They are also focused on whether the next monthly read on the U.S. labor market, due on Friday, backs up other data suggesting the labor market is cooling, and if fresh inflation reads ahead of the Fed's next two meetings, April 30-May 1 and June 11-12, show prices are as well.

Powell, speaking last Friday, said the stronger-than-expected inflation readings so far this year have not changed his overall view that inflation is headed downward and the Fed will cut rates later this year.

Financial markets are betting heavily against a May 1 rate cut. Mester on Tuesday said she does not think there will be enough information between now and then to justify it.

But that could change by June, Mester said.

"We have to be data dependent so I don't want to rule that out," Mester told reporters after her speech.

Interest-rate futures prices currently imply about a 65% chance of a rate hike by June, down from about 70% after the Fed's March meeting.

By Stella Qiu

SYDNEY (Reuters) - Asian shares tracked Wall Street lower on Wednesday as U.S. yields held near four-month highs, while a powerful earthquake in the region raised concerns about possible disruptions to the vital chip-making industry.

Markets are also pondering the risk of slower rate cuts ahead of U.S. data and an appearance by the world's most powerful central banker later in the day. Oil extended its ascent, while gold prices hit another a record high.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.7%. Japan's Nikkei dropped 1%, after a 20% blockbuster rally in the first quarter.

Taiwan's shares skidded 0.8% after a powerful earthquake with a magnitude of 7.2 rocked Taipei, the capital, sparking a tsunami warning for the islands of southern Japan and the Philippines.

Shares of the chip giant Taiwan Semiconductor Manufacturing Co fell 1.4% after the company said some facilities were evacuated following the quake.

China's blue chips eased 0.3% while Hong Kong's Hang Seng index fell 0.6%, even as a private survey showed that the expansion in the services industry picked up pace in March.

On Wall Street, a recent run of solid U.S. economic data - including an unexpected expansion in the manufacturing sector and the slow easing in the labour market - has stoked doubts about the amount of the Fed easing likely this year and next.

A pair of Fed policymakers on Tuesday both said they think it would be "reasonable" to cut U.S. interest rates three times this year, but markets only see about 69 basis points in easing.

"At this last meeting, they still indicate three times, but these movements tend to have some momentum. As they start to shift, you find that they will probably shift again next meeting and then by next meeting, they probably will be indicating that they're going to cut only twice," said Andrew Lilley, chief rates strategist at Barrenjoey in Sydney.

"And there's a very high chance of one in three, that they don't ease at all."

The three major Wall Street indexes fell about 0.7%-1%. Tesla (NASDAQ:TSLA) shares lost about 5% after quarterly deliveries fell for the first time in nearly four years.

Long-term Treasury yields climbed to multi-month highs overnight before paring some of the movements. The benchmark 10-year yield was last at 4.3471% on Wednesday, after hitting a four-month high of 4.405% overnight.

Investors now await euro zone inflation data, which could surprise on the downside after German inflation eased more than expected. In the U.S., a private payrolls report and a services sector survey are the key data risks, along with a speech from Fed Chair Jerome Powell on the economic outlook.

In currency markets, the dollar failed to get a lift from higher yields but still loomed large against major peers. The yen was jittery at 151.50 per dollar, just a whisker away from the 152 level that prompted authorities to intervene in late 2022.

Oil gained for a fourth straight day as escalating geopolitical tensions fuelled worries about tighter supplies ahead of an OPEC+ meeting where the group is unlikely to change output policy. Brent eased 0.2% to $87.18 a barrel, while U.S. crude lost 0.3% to $83.21 per barrel.

Gold prices extended their record rally on Wednesday. Spot gold hit an all-time high of $2,288.09 per ounce earlier in the session before running into some profit taking and was last flat at $2,277.99.

WASHINGTON (Reuters) - New orders for U.S.-manufactured goods rebounded more than expected in February, boosted by demand for machinery and commercial aircraft as manufacturing regains its footing.

Factory orders increased 1.4% after dropping 3.8% in January, the Commerce Department's Census Bureau said on Tuesday. Economists polled by Reuters had forecast orders rebounding 1.0%. They rose 1.0% year-on-year in February.

Manufacturing, which accounts for 10.4% of the U.S. economy, has turned the corner after struggling in the aftermath of 525 basis points worth of interest rate hikes from the Federal Reserve since March 2022. A survey from the Institute for Supply Management on Monday showed its manufacturing PMI rising above the 50 mark in March for the first time since September 2022.

Commercial aircraft orders increased 24.6% in February after slumping 63.5% in the prior month. Orders for motor vehicle bodies, parts and trailers rose 0.3%. Overall transportation orders rebounded 3.3% after tumbling 18.3% in January.

Machinery orders increased 1.8%, lifted by a 12.5% surge in mining, oil field and gas field machinery. There were also increases in orders for fabricated metal products and primary metals. But orders for computers and electronic products declined 1.4%, while those for electrical equipment, appliances and components decreased 2.1%.

Shipments of manufactured goods increased 1.4%, while inventories rose 0.3%. Unfilled orders at factories were unchanged for a second straight month.

The government also reported that orders for non-defense capital goods excluding aircraft, which are seen as a measure of business spending plans on equipment, rose by an unrevised 0.7% in February. Shipments of these so-called core capital goods declined 0.6% instead of 0.4% as reported last week.

Nondefense capital goods orders rebounded 4.3% instead of 4.4% as initially estimated. Shipments of these goods increased 2.6% instead of 2.7% as reported last week.

These shipments go into the calculation of the business spending on equipment component in the gross domestic product report. Business spending on equipment has contracted in four of the last five quarters.

By Lucia Mutikani

WASHINGTON (Reuters) - U.S. job openings edged up in February, though labor market conditions are gradually easing in support of expectations that the Federal Reserve will start cutting interest rates by June.

The Job Openings and Labor Turnover Survey, or JOLTS report, from the Labor Department on Tuesday showed there were 1.36 vacancies for every unemployed person in February, down from 1.43 in January. The decline in the vacancy-to-unemployment ratio reflected a spike in unemployment at the start of the year. Economists, however, argued that the drop in the ratio in February did not mark a material shift in the labor market.

"There is nothing here to worry Fed policymakers, who want a strong labor market, but the very slow progress in reducing the apparent excess demand for labor is not likely to encourage the Fed to cut interest rates in the immediate future," said Conrad DeQuadros, senior economic advisor at Brean Capital in New York.

Job openings, a measure of labor demand, edged up 8,000 to 8.756 million on the last day of February, the Labor Department's Bureau of Labor Statistics said. Data for January was revised lower to show 8.748 million unfilled positions instead of the previously reported 8.863 million.

Economists polled by Reuters had forecast 8.750 million job openings in February. Vacancies peaked at a record 12.0 million in March 2022.

Cleveland Fed President Loretta Mester, currently a voting member of the Fed policy-setting committee, said on Tuesday she anticipated that the U.S. central bank "will be able to move rates down gradually." The timing remains unclear.

Fed officials last month left the central bank's policy rate unchanged in the current 5.25%-5.50% range, having raised it by 525 basis points since March 2022.

Policymakers anticipate three rate cuts this year. Financial markets expect the first rate reduction in June.

There were an additional 126,000 open positions in finance and insurance in February. Unfilled positions in state and local government, excluding education increased by 91,000, while arts, entertainment and recreation had 51,000 more job openings.

But vacancies in the information industry declined 85,000, while the federal government had 21,000 fewer open positions.

The job openings rate was unchanged at 5.3% for the third straight month. Medium-sized businesses accounted for the increase in overall job openings. Small businesses with 10 to 49 employees saw unfilled jobs declining 152,000. Job openings were higher in the West, while the South reported a large decline.

Stocks on Wall Street were trading lower. The dollar slipped against a basket of currencies. U.S. Treasury prices fell.

QUITS CLIMB

Hiring increased 120,000 to 5.818 million. It was driven by retail trade, with 78,000 hires. There were also notable gains in transportation, warehousing and utilities. Much of the hiring came from small businesses with 10 to 49 employees, and was in the South. The hires rate rose to 3.7% from 3.6% in January.

"We view the openings data as indicative of demand for labor still being strong relative to supply but with there being less imbalance recently than there was a couple of years ago," said Daniel Silver, an economist at JPMorgan in New York.

The number of workers resigning from their jobs, likely for greener pastures, increased 38,000 to 3.484 million in February.

About 77,000 retail workers quit their jobs, while resignations increased 42,000 in the professional and business services sector. Most of the quits were in medium-sized firms. But quits decreased 53,000 in accommodation and food services.

The quits rate, viewed as a measure of labor market confidence, was unchanged at 2.2% for the fourth consecutive month. A steady quits rate suggests wage increases will likely continue to moderate, which bodes well for overall inflation.

Layoffs increased 128,000 to 1.724 million, the highest level in 11 months, driven by the arts, entertainment and recreation industry as well as accommodation and food services. They were mostly among small and medium-sized businesses and were concentrated in the South and Midwest. But job cuts decreased in professional and business services.

The layoffs rate climbed to a still low 1.1% from 1.0% in January. Low layoffs have accounted for most of the employment gains in recent months.

The Labor Department is expected to report on Friday that nonfarm payrolls increased by 200,000 jobs in March, according to a Reuters survey of economists.

The economy added 275,000 jobs in February. The unemployment rate is forecast unchanged at 3.9%.

"We expect job growth to moderate over the course of this year as demand for labor softens but remain positive," said Nancy Vanden Houten, U.S. lead economist at Oxford Economics in New York.

By Uditha Jayasinghe

COLOMBO (Reuters) - The World Bank raised its forecast for Sri Lanka's economy on Tuesday, projecting a growth of 2.2% for 2024, as the crisis-hit nation makes a faster-than-expected recovery from its worst financial crisis in decades.

Sri Lanka secured a $2.9 billion bailout from the International Monetary Fund (IMF) in March last year, helping it temper inflation, increase state revenue, and rebuild foreign exchange reserves after its economy crumpled in 2022.

The IMF programme helped Sri Lanka's economy stabilise, and it is expected to return to growth this year after contracting 2.3% in 2023.

The World Bank, in its latest report on South Asia, raised its growth forecast for Sri Lanka by 50 basis points. Real GDP growth was also expected to strengthen further to 2.5% in 2025, with modest recoveries in reserves, remittances and tourism, the development bank's report said.

South Asia, excluding Afghanistan, was expected to grow 6.1% in 2025, remaining the fastest-growing region in the world for the next two years, with India's expected growth of 6.6% for fiscal year 2025 leading the way.

The World Bank expects Pakistan's fiscal year 2024 growth at 1.8%, below the State Bank of Pakistan's projection of 2%-3%. Real GDP is seen expanding 2.3% in fiscal year 2025, the report said.