MOSCOW (Reuters) - Inflationary expectations for the year ahead among Russian households climbed to 11.1% in July from 10.2% in June, the central bank said on Monday, just days before it is widely expected to raise its key interest rate from 7.5%.

A Reuters poll on Monday suggested the Bank of Russia would hike rates to 8% at its meeting on Friday, increasing the cost of borrowing for the first time in over a year as the rouble's sharp slide adds to inflationary pressures.

The central bank targets inflation at 4%, which it aims to achieve by next year. It has forecast inflation will fall to 4.5%-6.5% this year.

BRASILIA (Reuters) - Economic activity in Brazil declined in May, showed a central bank index on Monday, signaling a non-linear trajectory for the country's growth, even as analysts have been consistently revising their forecasts upward for the year.

The IBC-BR economic activity index, a key gauge of gross domestic product (GDP), declined by a seasonally adjusted 2.0% compared to April, disappointing analysts who had expected zero growth according to a Reuters poll.

This marked the largest monthly drop since March 2021. The observed data series recorded a 2.15% increase on a year-on-year basis, resulting in an accumulated growth rate of 3.43% over the past 12 months.

Gabriel Couto, economist at Santander (BME:SAN) Brazil, stated that the frustrating outcome could be attributed to the end of contribution from the record grain production witnessed during the 2022-23 summer crops.

Speaking to reporters, Finance Minister Fernando Haddad said the numbers came in "as expected" amid an environment marked by persistently high borrowing costs.

"The economic slowdown intended by the central bank has arrived strongly, and we need to be cautious about what may happen," he said, emphasizing that current real interest rate levels are imposing a heavy burden on the economy.

The central bank has held its benchmark interest rate steady at a cycle-high of 13.75% since September to tackle inflationary pressures. Still, it has recently indicated the possibility of a rate cut in August if the inflation scenario continues to improve.

Andres Abadia, chief Latin America economist at Pantheon Macroeconomics, wrote in a note to clients that the performance underscores the need for interest rate cuts.

"Several key economic sectors are under pressure, on the back of tighter financial conditions, but low inflation, a resilient labor market, and still-supportive external conditions for Brazil’s key exports, suggest that economic growth will not grind to a halt," he said.

Economists have continuously revised their expectations for the performance of Latin America's largest economy this year, particularly following a stronger-than-anticipated first quarter, buoyed by a thriving agricultural sector.

However, due to seasonal factors, the farm sector is expected to decelerate in the year's second half.

According to a weekly survey conducted by the central bank among private economists, GDP growth for 2023 is now estimated at 2.24%, a decrease from 2.9% in 2022 but still significantly higher than the approximately 0.8% initially forecast when the year started.

Nevertheless, expectations going forward point to a slowdown amid financial constraints and high borrowing costs.

By Tom Westbrook

SYDNEY (Reuters) - A bruised dollar took respite on Monday after suffering its worst weekly drop of the year, as traders waited on economic data and policy decisions before selling it down any further.

The euro, which jumped 2.4% last week to a 16-month high, held just below that peak at $1.1223. The yen, also up 2.4% last week, held at 138.56 per dollar.

Chinese growth data landed a little above low expectations on Monday, but without sparking much currency market response as traders had already priced in a sluggish quarter and are waiting to see if the government steps up stimulus to promote spending.

The Australian and New Zealand dollars pulled back slightly, with the Aussie last at $0.6821 - off last week's peak of $0.6895 - and the kiwi down 0.2% at $0.6355 after hitting a five-month high of $0.6412 on Friday.

"The data suggests that China's post-COVID boom is clearly over," said Commonwealth Bank of Australia (OTC:CMWAY) strategist Carol Kong. "But markets already had low expectations, and reaction from here is fairly limited."

Last week's dollar slide began with yen buying, as investors unwound yen-funded positions in emerging markets, but extended sharply after softer-than-expected U.S. inflation data leant support to wagers that U.S. interest rates will soon peak.

Hikes are expected from the Federal Reserve and European Central Bank next week, but beyond that market pricing implies the Fed will likely stop, before cuts next year, while in Europe another hike probably beckons.

"The FX market is front running possible normalisation of Fed policy in 2024," said Chris Weston, head of research at broker Pepperstone in Melbourne.

"The question then is whether the dollar sell-off has gone too far and we are at risk of mean reversion early this week."

The U.S. dollar index dropped 2.2% last week, its sharpest one-week fall since November, and was steady at 99.936 in the Asia session.

Sharp (OTC:SHCAY) gains in the yen have slowed as traders weigh whether the ultra-dovish Bank of Japan is really likely to make any shifts at its policy meeting next week, given rhetoric suggests they are in no hurry.

The Swedish and Norwegian crowns made gains of more than 5% on the dollar last week, and have paused for breath. At $1.3086 sterling was parked just below last week's 15-month peak.

"The dollar may remain on the backfoot as the market re-positions itself for a less hawkish Fed," said Rabobank's head of FX strategy, Jane Foley.

"That said, the outlook for the latter few months of the year is less clear cut," she said.

"By then other major central banks including the ECB will also likely have reached their peak policy rates ... interest rate dynamics may therefore swing back in favour of the dollar."

By Shivangi Acharya, Sarita Chaganti Singh and Nikunj Ohri

NEW DELHI (Reuters) - India will push its Group of 20 partners at a meeting it is hosting to support its proposal to raise the share of taxes multinational companies pay to countries where they earn "excess profits", government officials said.

India's proposal, which has not been previously reported, could temper optimism among G20 members such as Australia and Japan that the meeting of finance ministers and central bankers in Gujarat would make progress on a long-awaited overhaul of global corporate taxation.

More than 140 countries were supposed to start implementing next year a 2021 deal overhauling decades-old rules on how governments tax multinationals. The present rules are widely considered outdated as digital giants like Apple (NASDAQ:AAPL) or Amazon (NASDAQ:AMZN) can book profits in low-tax countries.

The deal, pushed by the U.S., would levy a minimum 15% tax on large global firms, plus an additional 25% tax on "excess profits", as defined by the Organisation for Economic Cooperation and Development (OECD).

But several countries have concerns about the multilateral treaty underpinning a major element of the plan, and some analysts say the overhaul is at risk of collapse.

"India has made suggestions to get its due share of taxing rights on excess profits of multinational companies," one official said. The suggestions have been made to the OECD and will be discussed "extensively" during the G20 meeting on Monday and Tuesday, the official said.

Three officials, who asked not to be named as discussions with the OECD were ongoing and the G20 meeting had not begun, said India wants significant increases in the tax paid in countries where the firms do business. They did not specify how much India is seeking.

India's finance and external affairs ministries and the OECD did not respond to requests for comment.

Under the agreement, global corporations with annual revenues over 20 billion euros ($22 billion) are considered to be making excess profits if the profits exceed 10% annual growth. The 25% surcharge on these excess profits is to be divided among countries.

India, fighting for a higher share of taxes for markets where firms do business, is the world's most populous country and set to become one of the biggest consumer markets. Indian people's average income is set to grow more than 13-fold to $27,000 by the end of 2047, according to a survey by the People's Research on India's Consumer Economy.

The G20 host nation will also propose that withholding taxation be de-linked from the excess profit tax principle. The rules now say countries offset their share of taxes with the withholding tax they collect.

Withholding tax is collected by companies while making payments to vendors and employees, and remitted to tax authorities.

The OECD in a document issued on Wednesday said a few jurisdictions have expressed concerns over allocating taxing rights among countries.

"Efforts to resolve these issues are underway with a view to prepare the Multilateral Convention for signature expeditiously," it said.

($1 = 82.0490 Indian rupees)

($1 = 0.8907 euros)

By Aftab Ahmed

GANDHINAGAR, India (Reuters) -The United States is working with India to develop an investment platform to lower the cost of capital and increase private investment to fast-track India's energy transition, U.S. Treasury Secretary Janet Yellen said on Monday.

After a bi-lateral meeting with India's finance minister Nirmala Sitharaman on the sidelines of a G20 meeting, Yellen said the two nations have been collaborating across a range of economic issues, including commercial and technological collaboration and strengthening supply chains.

"In particular, we look forward to working with India on an investment platform to deliver a lower cost of capital and increased private investment to speed India's energy transition," she said.

She also said the two countries are close to reaching an agreement on the global minimum tax system.

The visit is Yellen's third to India this year, indicating the growing closeness between the two countries.

The improvement in bilateral relations was highlighted during Prime Minister Narendra Modi's state visit to Washington last month which saw a slew of defence and high technology deals being signed.

Sitharaman said she was looking forward to furthering bilateral interests through development cooperation and new investment opportunities through alternate investment platforms for renewable energy.

"As we look ahead, we reaffirm our commitment to achieve substantial outcomes through close engagement," she added.

Yellen will visit Vietnam after the G20 finance meetings end on July 18.

SHANGHAI/SINGAPORE (Reuters) -China's central bank rolled over maturing medium-term policy loans and kept the interest rate unchanged as expected on Monday, however markets expect authorities will need to unleash more stimulus to support slowing economic growth.

The economic recovery has lost momentum after an initial burst in the first quarter, prompting monetary authorities to lower key policy rates last month.

However, some market watchers now expect policymakers to deliver fiscal stimulus, as any further interest rate cuts would widen the yield gap with the United States, putting the yuan under more pressure.

The People's Bank of China (PBOC) said it was keeping the rate on 103 billion yuan ($14.43 billion) worth of one-year medium-term lending facility (MLF) loans to some financial institutions unchanged at 2.65%.

Monday's market operations would fully meet financial institutions' cash demands and keep "banking system liquidity reasonable ample," the central bank said in an online statement.

In a Reuters poll conducted last week, market participants predicted no change to the MLF rate.

Traders and analysts said the rate decision was well expected after the central bank lowered key policy rates last month.

On Friday, a senior central bank official said that the PBOC would use policy tools such as the reserve requirement ratio (RRR) and MLF to help the world's second-largest economy withstand challenges.

Economists now expect more stimulus could be announced after the Politburo meeting later this month, when a top decision-making body of the ruling Communist Party meets to discuss the economy.

"We expect the July Politburo meeting statement to continue emphasising 'countercyclical adjustment' of monetary policy and 'more proactive' fiscal policy," economists at Goldman Sachs (NYSE:GS) said in a note.

"Specifically we expect a 25 bp RRR cut in Q3 and a 10 bp policy interest rate cut in Q4 to facilitate credit growth. Policymakers will probably also resort to faster government bond issuance in Q3 to help with investment growth in our view."

With 100 billion yuan worth of MLF loans set to expire this month, the operation resulted a net 3 billion yuan fresh fund injection into the banking system.

The central bank also injected 33 billion yuan through seven-day reverse repos and kept borrowing costs unchanged at 1.90%, it said in an online statement.

China is due to release due to release second quarter gross domestic product data at 0200 GMT.

($1 = 7.1403 Chinese yuan)

Investing.com -- Second-quarter earnings season kicks into gear, the U.S. and China release economic data and inflation figures out of the U.K. will likely determine the size of the Bank of England’s next rate hike. Meanwhile, oil prices look poised for another weekly gain.

1. Earnings time

Second-quarter earnings season gets underway in earnest in the coming week, with Tesla (NASDAQ:TSLA) the first of the massive growth and technology names that have dominated the U.S. stock market so far this year to report, with results expected on Wednesday.

Tesla is one of seven huge stocks, along with Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Alphabet (NASDAQ:GOOGL), Amazon (NASDAQ:AMZN), Nvidia (NASDAQ:NVDA) and Meta Platforms  (NASDAQ:META) recently dubbed the “Magnificent Seven” by investors. Shares in the megacaps have soared between 40% and over 200% so far this year, accounting for almost all of the S&P 500’s rally.

There are indications the rally is broadening to other sectors, but the outsize gains have come with big earnings expectations so if Tesla or any other megacaps disappoint this quarter, the hit to equity indexes could be severe.

A slew of other big companies also post results in the coming week. Bank earnings continue, with Bank of America (NYSE:BAC) on Tuesday and Goldman Sachs (NYSE:GS) on Wednesday. Also on the docket are Johnson & Johnson (NYSE:JNJ), Netflix (NASDAQ:NFLX) and Philip Morris (NYSE:PM).

2. U.S. economic data

U.S. retail sales data for June on Tuesday is expected to show an increase of 0.5%, boosted by rebounding auto sales and higher gasoline station sales, indicating that consumer demand remains resilient.

Investors will also get an update on the health of the housing sector with reports on building permits, housing starts and existing home sales. High mortgage rates are still weighing on sales of existing homes, but construction is improving given stable pricing and a pick-up in new home sales due to the lack of properties on the market.

There will also be reports on regional manufacturing activity, which is expected to remain sluggish along with the weekly data on initial jobless claims.

3. China economic data

A flurry of economic data from China on Monday is expected to show its post-pandemic bounce is rapidly losing momentum, fueling expectations that Beijing will soon need to unveil more stimulus measures.

Gross domestic product is expected to have grown by an annualized 7.3% in the three months to June, compared with growth of 4.5% in the first quarter.

However, that reading will be heavily skewed by a sharp slump in activity in the spring, when large parts of the country were still locked down.

Mounting deflationary pressure and a slump in trade have added to concerns over the outlook for the world’s second-largest economy, which as recently as six months ago had investors betting on a robust recovery.

4. U.K. inflation

The U.K. is to release June inflation data on Wednesday and investors will be watching closely as it will likely determine the size of the Bank of England’s next rate hike.

The headline consumer price index is expected to ease to 8.2% year-over-year from 8.7% in May as food and fuel prices dip. Core inflation is also expected to edge lower, but the services component is expected to hold steady at a post-COVID high of 7.4%.

In its June meeting minutes the BoE said further tightening would be required if there were signs of persistent inflationary pressures in the economy, including in services CPI.

This could make August’s meeting a close call: an uptick in services CPI would probably lock in bets for another 50-basis point hike, while a lower reading would probably nudge the dial in favor of a smaller 25 bps increase.

5. Oil prices

Oil prices recorded their third-straight weekly gain last week and the rally could resume in the coming week as easing inflation, plans to refill the U.S. strategic reserve, supply cuts and disruptions underpin prices.

"While oil prices are likely slightly overbought in the very near term, touching the highest levels since early May, the bias appears to be for a grind higher," Rob Haworth, senior investment strategist at U.S. Bank Wealth Management told Reuters.

Oil prices gained nearly 2% last week, after supply disruptions in Libya and Nigeria heightened concerns that the markets will tighten in coming months.

Oil prices fell more than a dollar a barrel on Friday as the dollar strengthened and oil traders booked profits from a strong rally.

--Reuters contributed to this report

By Kevin Yao

BEIJING (Reuters) -China's central bank will use policy tools such as the reserve requirement ratio (RRR) and medium-term lending facility to weather the challenges facing the world's second-largest economy, a senior bank official said on Friday.

Momentum in China's post-pandemic recovery has slowed sharply after a brisk pickup in the first quarter, increasing pressure on policymakers for fresh stimulus measures.

According to the needs of the economic and price situation, the People's Bank of China (PBOC) "will make comprehensive use of various monetary policy tools, such as the reserve requirement ratio, medium-term lending facility, open market operations," said Zou Lan, head of the PBOC monetary policy department.

"In recent years, China has insisted on implementing a prudent and normal monetary policy, with sufficient policy space and abundant policy tools," Zou told a press conference, adding that the bank will keep credit growth appropriate and guide banks to increase lending to small and private firms.

The central bank will step up "countercyclical adjustments" to support the economic recovery, PBOC Deputy Governor Liu Guoqiang told the press conference.

China's exports fell last month at their fastest pace since the onset three years ago of the COVID-19 pandemic, data showed on Thursday. The economy likely grew 7.3% in the second quarter from a year earlier due to a low base, according to a forecast of Monday's data in a Reuters poll, but momentum is rapidly faltering.

The central bank cut the RRR - the amount of cash that banks must hold as reserves - in March, and cut its benchmark lending rates by a modest 10 basis points in June, the first such reduction in 10 months.

Analysts polled by Reuters expect the central bank to cut the RRR by 25 basis points in the third quarter.

Downward price pressure is building as consumer prices teetered on the edge of deflation and producer deflation worsened in June. But Liu said China has not seen deflation and there were no deflationary risks for the second half.

YUAN STABILITY, PROPERTY SUPPORT

China will keep the yuan basically stable and prevent sharp fluctuations, Liu said, adding that the currency will be underpinned by China's economic recovery, a current account surplus that is about 2% of GDP and foreign exchange reserves of more than $3 trillion.

"We have the confidence, conditions and ability to cope with various shocks and maintain the smooth operation of the foreign exchange market," Liu said. "As for the specific policy tools, we will use them reasonably according to the needs of the situation."

The currency rose on Friday, partly on Liu's reassurances.

Zou said there was room for making "marginal optimisation" of property polices considering profound changes in supply and demand in the real estate market.

Special loans worth 200 billion yuan ($28 billion) to help developers finish pre-sold housing projects will be extended to May 2024, Zou said. The original cutoff was March this year, the state-backed Securities Times reported.

Regulators this week extended some policies in a November rescue package in November to shore up liquidity in the embattled property sector, which accounts for one-fourth of China's economic activity.

($1 = 7.1283 Chinese yuan renminbi)

By Saqib Iqbal Ahmed

NEW YORK (Reuters) - Cooling U.S. inflation is accelerating a decline in the dollar, and risk assets around the world stand to benefit.

The dollar is down nearly 13% against a basket of currencies from last year’s two-decade high and stands at its lowest level in 15 months. Its decline quickened after the U.S. reported softer-than-expected inflation data on Wednesday, supporting views that the Federal Reserve is nearing the end of its interest rate-hiking cycle.

Because the dollar is a linchpin of the global financial system, a wide range of assets stand to benefit if it continues falling.

Weakness in the dollar can be a boon to some U.S. companies, as a weaker currency makes exports more competitive abroad and makes it cheaper for multinationals to convert foreign profits back into dollars.

The U.S. technology sector, which includes some of the big growth companies that have led markets higher this year, generates just over 50% of its revenues overseas, an analysis of Russell 1000 companies by Bespoke Investment Group showed.

Raw materials, which are priced in dollars, become more affordable to foreign buyers when the dollar declines. The S&P/Goldman Sachs Commodity Index is up 4.6% this month, on pace for its best month since October.

Emerging markets benefit as well, because a falling U.S. currency makes debt denominated in dollars easier to service. The MSCI International Emerging Market Currency Index is up 2.4% this year.

"For markets, the weaker dollar and its underlying driver, weaker inflation, is a balm for everything, especially for assets outside the U.S.," said Alvise Marino, foreign exchange strategist at Credit Suisse.

The greenback's tumble has come as U.S. Treasury yields eased in recent days, dulling the dollar's allure while boosting a wide range of other currencies, from the Japanese yen to the Mexican peso.

"That sound you hear is the breaking of technical levels across the foreign exchange markets," said Karl Schamotta, chief market strategist at Corpay. "The dollar is plunging toward levels that prevailed before the Fed started hiking, and we're seeing risk-sensitive currencies melt up on a global basis."

A continued fall in the dollar could boost profits for foreign exchange strategies such as the dollar-funded carry trade, which involves the sale of dollars to buy a higher-yielding currency, allowing the investor to pocket the difference.

The dollar's decline has already made the strategy a profitable one this year: An investor selling dollars and buying the Colombian peso would have collected 25% year-to-date, while the Polish zloty has yielded 13%, data from Corpay showed.

Paresh Upadhyaya, director of fixed income and currency strategy at Amundi US, is bearish on the dollar while betting on gains in the Kazakhstan tenge, Uruguayan peso and Indian rupee.

"When you look at what's going on right now, the outlook for the dollar remains pretty bleak," said Upadhyaya, who expects carry trades to thrive if the dollar keeps falling.

In the world of monetary policy, the dollar's decline may be a relief to some countries, as it removes the urgency for them to support their falling currencies.

Among them is Japan. The greenback has tumbled 3% against the yen this week and is set for its biggest weekly fall against the Japanese currency since January. Yen weakness has been problematic for Japan's import-reliant economy and raised expectations Japan would again intervene in markets to support its currency after doing so for the first time since 1998 last year.

Traders have also been watchful for potential action from Sweden's central bank given weakness in the Swedish krona. But this week, the dollar is down almost 6% against the krona and set for its biggest weekly drop since November.

Continued strength in the yen could see investors unwind the large bearish positions that have built up against the currency in recent months, pushing it higher, said Societe Generale (OTC:SCGLY) currency strategist Kenneth Broux.

Of course, being bearish the dollar has its own risks. One is a potential rebound in U.S. inflation, which could stoke bets on more Fed hawkishness and unwind many of the anti-dollar trades that have prospered this year.

Though inflation has cooled, the U.S. economy has remained resilient compared with other countries and few believe the Fed will cut rates anytime soon, which could potentially limit the dollar's near-term downside.

Still, Helen Given, FX trader at Monex USA, believes the Fed will wrap up its rate-hiking cycle before most other central banks, sapping the dollar’s long-term momentum.

While the dollar may pare some of its recent losses, "looking six months out it's likely the dollar will be even weaker than it is today," she said.

By Kevin Buckland

TOKYO (Reuters) - Asian stocks rose on Friday, on course for their best week this year, as a cooling in U.S. inflation stoked speculation that the Federal Reserve could pause rate hikes after this month.

The dollar sank to a fresh 15-month low against major peers and U.S. Treasury yields languished near multi-week lows following the sharpest weekly drop in four months.

Gold was poised for its best week in three months as the dollar floundered, while crude oil rose to the highest in nearly three months.

While money market traders still see a quarter point bump to the Fed funds rate on July 26 as close to a sure thing, they have reduced the chances of another this year to just 1-in-5.

Data on Thursday showed the smallest increase in U.S. factory gate inflation in nearly three years, reinforcing the milder inflation outlook after a report the previous day showing consumer price gains mitigated to the slowest pace in more than two years.

"What it means is we've got the Fed with its chest pretty much crossing the finish line at the end of the most aggressive tightening cycle in four decades, so it does warrant the rapid repricing that we've seen in many of these asset classes," said Tony Sycamore, a market analyst at IG in Sydney.

"The equity market absolutely took off, and the dollar is under intense pressure."

MSCI's broadest index of Asia-Pacific shares outside Japan rallied 0.7% on Friday to put it on track for a 5.4% weekly advance, the biggest for eight months.

Hong Kong's Hang Seng gained 0.52% and mainland Chinese blue chips added 0.12%. South Korea's Kospi jumped 1%.

Japan's Nikkei, though, was a notable outlier, flipping early gains to be last down 0.43% as it struggles to find its feet following its retreat from a 33-year peak reached at the start of this month.

U.S. E-mini equity futures also pointed to a 0.16% lower restart for the S&P 500, after the index rallied 0.85% overnight.

Meanwhile, the U.S. dollar index - which measures the currency against six major peers - edged about 0.1% lower to touch 99.637 for the first time since April of last year.

"The dollar index can probably trade down toward 98 over the coming weeks without too many problems," said IG's Sycamore. "I wouldn't be fighting that trend."

U.S. two-year Treasury yields, which tend to be most sensitive to the Fed policy outlook, languished at 4.63%, following a 30 basis point slide this week that extended its drop from last week's 16-year peak above 5%.

Ten-year yields wallowed around 3.77% following a 28 basis point decline since last Friday, when it reached an eight-month high at 4.094%.

Japan's market was again an outlier, with the 10-year yield rising as high as 0.485%, taking it the closest its been to the Bank of Japan's 0.5% policy ceiling since March 10.

Speculation that the BOJ could widen its 10-year yield band this month has been rising since a labor report a week ago showed solid growth in wages.

In Australia, the government's appointment of deputy governor Michele Bullock to lead the Reserve Bank of Australia from mid-September had little effect on markets.

The Aussie dollar was flat at $0.6891, following two days of 1.5% gains against its U.S. peer to take it to the highest in a month.

In commodities, gold edged to a new one-month high at $1,963.59, buoyed by the dollar's weakness. It has rallied nearly 2% this week.

Brent crude futures rose 27 cents, or 0.3%, to $81.63 per barrel on Friday. U.S. West Texas Intermediate crude futures rose 35 cents, or 0.5%, to $77.24.