China eyes more vigorous fiscal policy short of strong stimulus

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But the U.S. president said he was ready to hit all Chinese exports or goods worth 500 billion Dollars.

European Union finance chief Pierre Moscovici warned that "further trade escalation conflicts would negatively affect" all the countries involved, the U.S. included.

Sources told Reuters on Friday that the Bank of Japan was holding preliminary discussions on possible changes to its monetary policy, which include adjustments to interest-rate targets and stock-buying techniques, and a focus on ways to make the massive stimulus programme more sustainable. The Reuters report also added to the yen's strength, which was last up 0.3 percent at 111.07 per dollar. The dollar fell against its major trading partners after CNBC reported that Trump was anxious the Federal Reserve will raise interest rates twice more this year.

In a series of comments late last week that shook financial markets, President Donald Trump attacked the Federal Reserve for raising interest rates and for undercutting his efforts to slash the US trade deficit. Analysts at JPMorgan said these moves, together with a lower greenback and better commodity prices, should be positive for Asian equities. -China trade tensions and supply increases meant oil prices saw their third weekly loss.

In early trade Tuesday, the yield on 10-year Chinese government bonds jumped 5 basis points to 3.57 percent, and were last seen at 3.56 percent. Treasury Secretary Mnuchin also chipped in to allay concerns.

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The Japanese 10-year government bond yields hit a 6-month high as investors' speculation rose over a possible change in the monetary policy by the Bank of Japan (BoJ) ahead of the central bank's two-day meeting on July 30-31.

Trump's complaints about the Federal Reserve interest rate hikes and a strong dollar saw the United States currency fall late last week but the decline was unlikely to continue, analysts said. The Shanghai Composite index .SSEC and the blue-chip CSI300 index .CSI300 both closed up 1.6 percent. Gold may capitalize on the dollar's weakness if trade tensions put the currency under additional downward pressure. Australian shares .axjo were off 0.1 percent while the New Zealand market .nz50 was down 0.4 percent.

"The dollar will become stronger and stronger, despite Trump's efforts to keep it weak", said Taylor, who runs Taylor Global Vision, which produces a newsletter on financial markets.

"The market took the news as a possible sign the anchor at the long end may allow for some natural drift higher", ANZ said in a note to clients.

But China's Foreign Ministry denied the charge during a daily briefing in Beijing, saying the yuan's rate was determined by market forces.

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