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Japan officials jawbone as dollar nears 160 yen

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Fed's favoured inflation index looms large this week

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US Presidential debate, French elections on horizon

(Adds comment, refreshes prices at 0815 GMT)

By Wayne Cole and Amanda Cooper

SYDNEY/LONDON, June 24 (Reuters) -

Global shares steadied on Monday ahead of U.S. price data

that investors are banking on to show a renewed moderation in

inflation, while markets were on alert for Japanese intervention

as the dollar tested the 160-yen barrier.

Geopolitics also loomed large, with the first U.S.

presidential debate on Thursday and the first round of voting in

the French election at the weekend.

The MSCI All-World index was flat on the

day, having fallen for the previous two sessions. In Europe, the

STOXX 600 edged into positive territory, while U.S.

index futures were up 0.1-0.2%.

Shares in Boeing ( BA ) could face pressure after Reuters

reported that U.S. prosecutors are recommending criminal charges

be brought against the aircraft maker.

Japan's Nikkei closed up 0.5%, with the continued

decline in the yen putting pressure on the Bank of Japan to

tighten policy despite patchy domestic data.

Minutes of the central bank's last policy meeting out on

Monday showed there was much discussion about tapering its bond

buying and raising rates.

Japan's top currency official was out early to voice

disapproval with the yen's latest drop which saw the dollar

reach as high as 159.94.

The dollar was trading just a shade softer at 159.74, eyeing

the 160.245 peak from late April where Japan is thought to have

started spending around $60 billion buying the yen.

Demand for carry trades - borrowing yen at low rates to buy

higher yielding currencies - has also seen both the Australian

and New Zealand dollars reach 17-year peaks on the yen.

"Fresh cyclical highs for the dollar versus the yen

overnight, further intervention jawboning from Japan's FX

supremo Kanda and continued pressure on the yuan underline the

pain being felt in Asia and EM more broadly from the Fed's high

for longer stance, and will probably revive 'currency wars'

chatter," Marc Ostwald, chief global economist at ADM Investor

Services.

PARSING THE PCE

Even the euro was testing recent highs at 170.87 yen

, despite being saddled with a round of soft

manufacturing surveys (PMI). The euro is heading for a drop of

1.2% in June, its largest monthly decline since January. But on

Monday, it was trading up 0.2% on the day at $1.07123.

"The decline in the euro area flash June PMI raises some

concern that the nascent rebound is being cut short," analysts

at JPMorgan wrote in a note.

"The abruptness of the drop is notable against the backdrop

of the French election, which was mentioned explicitly by firms

as a reason for the drag."

France's far-right National Rally (RN) party and its allies

were seen leading the first round of the country's elections

with 35.5% of the vote, according to a poll published on Sunday.

Manufacturing surveys from the United States, in contrast,

showed activity at a 26-month high in June, though price

pressures subsided considerably.

The latter shift whetted appetites for the personal

consumption expenditures (PCE) price index due on Friday. Annual

growth in the Federal Reserve's favoured core index is expected

to slow to 2.6% in May, the lowest in more than three years.

"Note that low PCE deflator outcomes are needed to keep the

y/y rate from rising through the course of this year given the

string of low prints in the second half of 2023," cautioned

analysts at NAB.

"The Fed is well aware of this as the median dot for end

2024 was 2.8% for PCE, unchanged from its current level and

implying average monthly outcomes of 0.18%."

A low result would probably reinforce market bets on a Fed

rate cut as early as September, which futures currently price as

a 65% prospect.

There are at least five Fed speakers on the docket this

week, including San Francisco Fed President Mary Daly and Fed

Governors Lisa Cook and Michelle Bowman.

In commodity markets, gold pared losses in line with the

retreat in the dollar to trade up 0.5% at $2,330 an ounce, while

oil rose, pushing Brent crude up 0.2% to $85.41 a barrel

and U.S. crude also up 0.2% at $80.87.

(Additional reporting by Wayne Cole in Sydney; editing by

Muralikumar Anantharaman and Mark Heinrich)