Showing posts with label Currencies. Show all posts
Showing posts with label Currencies. Show all posts

Mar 1, 2021

News | Currencies | The U.S. Dollar: Riskier Currencies Recover from Friday's carnage.

Risk currencies recover from Friday carnage as bonds regain composure


The Australian dollar in various denominations.

The Australian dollar and other riskier currencies rebounded against the U.S. dollar on Monday, as a sell-off last week in global bonds on worries about eventual monetary policy tightening appeared to have eased for now.

The British pound drew additional support from bets of a faster vaccine-led economic recovery, while resurgent risk appetite pushed the safe-haven Japanese yen to a six-month low versus the dollar.

"The market is overpricing (the chance of a near-term rate hike)," said Tohru Sasaki, JPMorgan's head of Japan market research in Tokyo.

"Eventually it's true that if the economy continues to be strong and if inflationary pressure is getting higher, the central bank should be normalising the policy rate. But we think it's too early to do that, so it's a kind of overreaction at this moment."

The Aussie jumped 0.6% to $0.7754 in the Asian session on Monday, following a 2.1% plunge on Friday.

The Reserve Bank of Australia will hold its monthly policy meeting on Tuesday, and markets are widely expecting it to reinforce its forward guidance for three more years of near-zero rates, while also addressing the market dislocation.

The New Zealand dollar strengthened 0.6% to $0.7270, recovering some of Friday's 1.9% slide.

Sterling rose 0.4% to $1.3972 as investors bet a swift vaccination program would help lift the British economy from a deep coronavirus-driven recession.

British finance minister Rishi Sunak is set to announce an extra 1.65 billion pounds ($2.30 billion) to fund the country's vaccination roll-out as part of his annual budget statement on Wednesday.

The euro gained 0.2% to $1.20910, after dropping 0.9% at the end of last week, the most since April.

Against the yen, the dollar hit a six-month high of 106.70 before erasing gains.

The dollar index was little changed in Asian trade after posting its biggest surge since June on Friday.

U.S. bond yields slid sharply on Monday, with the benchmark 10-year U.S. Treasury yield falling about 5 basis points to 1.403%, off Thursday's one-year high of 1.614%.

Currency markets have taken their cues from the global bond market, where yields had surged last week in anticipation of a swift economic rebound and on bets that global central banks will need to tighten policy much earlier than they have been forecasting.

Equities and commodities also sold off last week as the debt rout unsettled investors and lifted demand for safe-haven currencies, including the U.S. dollar.

Federal Reserve Chair Jerome Powell, who last week repeated the U.S. central bank would look through any near-term inflation spike and tighten policy only when the economy was clearly improving, will speak on the economy at a Wall Street Journal jobs event on March 4.

Positioning flows indicated dollar net short positions rose last week after falling to the lowest level since mid-December the previous week.

In crypto-currency markets, bitcoin rose 2% to $46,155.72 but was still well off a record high of $58,354.14 hit on Feb. 21.

Oct 22, 2020

Currencies | The Dollar: The dollar remains vulnerable to 'significant depreciation,' warns Standard Chartered


Eustance Huang

SINGAPORE — One Standard Chartered Bank analyst warns that the greenback is vulnerable to a “significant depreciation” as sovereign fundamentals appear to be “pointing south.”

“You have the twin deficits in the U.S. getting worse, you have the trade balance at the worst in 15 years,” Eric Robertsen, global head of research at Standard Chartered Bank, told CNBC’s “Squawk Box Asia” on Wednesday.

Election Day is less than two weeks away and Robertsen said the outcome would determine “the path to the end result.”

The analyst said a victory for former Vice President Joe Biden would mean any dollar depreciation is set to be “very clear and very pronounced.” If President Donald Trump is reelected, Robertsen said it will be “a little bit more messy in the short term.”

As of Thursday morning Singapore time, the dollar index which tracks the greenback against a basket of its peers sat at 92.743 — down more than 3% for the year so far.

Dollar depreciation trend

Robertsen said he sees a “pretty good dollar depreciation trend” over the next few years.

He argued the outperformance of U.S. assets has been a “big driver” of dollar appreciation over the last 10 years, with the S&P 500 beating the MSCI Emerging Markets equity index by 100 percentage points in that period.

“If you were to see a reversal of that — either because of global trade or a change in the United States’ domestic economic agenda — and combined with the fact that the U.S. no longer has an interest rate advantage over its G-10 peers, I think you can make a very compelling case for a multi-year dollar depreciation,” Robertsen said.

On Tuesday, prominent economist Stephen Roach told CNBC that conditions are ripe for a sharp weakening in the greenback in the coming year, as he forecast a 35% decline of the U.S. dollar decline by the end of 2021.

Oct 21, 2020

Currencies | The British Pound: British pound jumps as EU's top Brexit negotiator says a trade deal is within reach


Silvia Amaro

BRUSSELS, BELGIUM - FEBRUARY 3: European Union Chief Brexit negotiator Michel Barnier makes a speech during a press conference in Brussels, Belgium on February 3, 2020.

BRUSSELS, BELGIUM - FEBRUARY 3: European Union Chief Brexit negotiator Michel Barnier makes a speech during a press conference in Brussels, Belgium on February 3, 2020.

Anadolu Agency

Sterling jumped more than 0.8% against the U.S. dollar on Wednesday after the EU signaled that a trade deal with the U.K. is still possible.

“Despite the difficulties we’ve faced, an agreement is within reach if both sides are willing to work constructively, if both sides are willing to compromise and if we are able to make progress in the next few days on the basis of legal texts and if we are ready over the next few days to resolve the sticking points, the trickiest subjects,” the EU’s chief negotiator Michel Barnier told the European Parliament.

His comment provided traders with some optimism that a trade deal between the U.K. and the EU will be reached even though their negotiations have been stuck over the same three issues for months.

On Friday, U.K. Prime Minister Boris Johnson struck a gloomy tone when warning exporters to prepare for a no deal with the EU. A spokesperson for the government went further on the same day saying that European negotiators did not need to travel to London this week if the EU wouldn’t change its approach to the talks.

British officials were disappointed late last week when European leaders called on the U.K. “to make the necessary moves to make an agreement possible.”

These tensions have halted the negotiations, but the EU has now said it is ready to return to the table as soon as the U.K. government chooses to do so too.

‘Seek the necessary compromises’

“We will seek the necessary compromises on both sides in order to do our utmost to reach an agreement and we will do so up until the very last day that it is possible to so do,” Barnier told lawmakers on Wednesday.

“Our doors will always remain open until the very end but ... we will remain firm,” he added.

The U.K. ceased its EU membership in January but it’s following EU rules until the end of the year so both sides can work on new trade arrangements. These will be different from the zero-tariff regime in place at the moment. Failure to develop new trade rules will mean that exporters will face higher costs and barriers when selling goods between the two blocs.

U.K. government minister Michael Gove told Sky News on Sunday that there was a less than 50% chance of a deal being reached. Earlier this month, he had assigned it with a 66% probability. Negotiators have yet to find compromises over fisheries, competition rules and the future oversight of their potential deal.

In addition, the EU has said that it will not sign any new trade deal while the U.K. government does not fully comply with the Withdrawal Agreement, which they signed earlier this year and which paved the way for the U.K.’s departure from the bloc. The government in London put forward a bill that overrides parts of these previous accords and the EU has demanded that the upcoming legislation is corrected to respect their previous deal.

Oct 15, 2020

Currencies | The Yuan: China's yuan will rally despite the central bank's moves to curb its strength, analysts say


Eustance Huang

SINGAPORE — The Chinese yuan will continue to strengthen against the U.S. dollar, even though China’s central bank has taken steps to curb its currency appreciation, analysts told CNBC.

The onshore Chinese currency appreciated by nearly 3.9% since the start of 2020 before the People’s Bank of China changed rules over the weekend, making it cheaper for traders to bet against the yuan. The yuan’s year-to-date gains against the greenback were pared after the announcement — to about 3.4%, as of Thursday morning Singapore time.

In general, though, Marc Chandler, chief market strategist at Bannockburn Global Forex, said the PBOC’s move is “a small technical adjustment.”

“I think it’s just a mild protest, a mild pushback against the sharp appreciation” of the yuan, he told CNBC’s “Squawk Box Asia” on Tuesday.

“I’m not sure that this is a big change of direction and I’d still be looking for the (yuan) to finish stronger, maybe closer to 6.65 before the end of the year,” he said. The onshore Chinese currency is currently trading at around 6.7234 against the U.S. dollar, while its offshore counterpart changed hands at about 6.7177 against the greenback.

Similarly, Peter Chia, senior foreign exchange strategist at United Overseas Bank, said the move by the PBOC would only leave the yuan “a little bit more stable, rather than appreciating non-stop.” Chia forecast the yuan could hit 6.60 against the U.S. dollar by the middle of next year.

He explained to CNBC’s “Street Signs Asia” that as long as the “bigger macro factors” weighing down the greenback remain, the U.S. dollar could weaken further against the yuan in the coming quarters.

“We think the medium-term trend remains extremely constructive for the Chinese yuan,” said Adam Margolis, head of foreign exchange, commodities and rates for Asia at JPMorgan Private Bank.

UOB’s Chia also pointed out that it’s not the first time the Chinese central bank has made such a move. Its previous action in September 2017 “didn’t really stop” the weakness in the greenback from eventually weighing down the U.S. dollar-Chinese yuan currency pair, the strategist said.

Oct 8, 2020

Currencies | The Dollar: Dollar higher as markets wait on stimulus news


3 minutes

A hand holding U.S. dollar banknotes in China on January 25, 2018.

A hand holding U.S. dollar banknotes in China on January 25, 2018.

Zhang Peng | LightRocket | Getty Images

The U.S. dollar edged higher against a basket of currencies on Thursday, but held in its recent range as investors waited for fresh news on whether new U.S. fiscal stimulus is likely in the near term.

The greenback has been whipsawed by swings in risk sentiment after U.S. President Donald Trump on Tuesday halted negotiations with Democrats on a new economic package but later pushed for the approval of more targeted stimulus bills to offset economic damage from the coronavirus.

There was little new information on Thursday to move the dollar strongly in either direction.

“We’re just really consolidating, I think the market right now lacks near-term conviction, partly because of uncertainty about U.S. fiscal policy, and sensitivity to these U.S. presidential tweets,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York. “There’s no new news to shake things up one way or another.”

The dollar index gained 0.12% against a basket of major currencies to 93.73. It has fallen from a two-month high of 94.75 on Sept. 25.

The greenback was little changed against the Japanese yen at 105.97 yen, while the euro fell 0.17% to $1.1740.

The dollar index has also weakened in the past two weeks on bets that Democrat presidential candidate Joe Biden is more likely to win the Nov. 3 U.S. election, and that Democrats could also win the Senate.

A Democratic sweep would make larger fiscal stimulus more likely, which would weaken the U.S. currency.

“Overall, investors seem to be focusing more on the increasing odds of a Biden win and what that might imply for a stimulus package after the election,” said Marshall Gittler, head of investment research at BDSwiss.

The New Zealand dollar dropped as much as half a percent after central bank officials again hinted that negative interest rates are possible. It was last down 0.06% at $0.6575.

Sterling traded 0.10% lower at $1.2905 as uncertainty about Britain’s exit from the European Union weighed on the currency.

Prime Minister Boris Johnson is prepared to fully leave the EU without a deal when the Brexit transition period ends, his spokesman said on Thursday, but the British leader still believes there is a deal to be done.

Sep 30, 2020

Currencies | The Dollar: Dollar slides as risk sentiment rises on U.S. stimulus hopes


4 minutes

U.S. dollar banknotes.

U.S. dollar banknotes.

Liu Jie | Xinhua via Getty

The dollar fell against most currencies in choppy trading, as risk sentiment improved after U.S. government officials expressed hope that another stimulus package could be passed to help ease the economic impact of the coronavirus-induced recession.

The greenback slid against the yen and weakened versus currencies associated with higher risk appetite such as the Australian, New Zealand, and Canadian dollars.

U.S. House of Representatives Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin both expressed hope for a breakthrough on additional COVID-19 relief on Wednesday, as they prepared to resume talks aimed at hammering out a bipartisan deal.

“Renewed hopes for stimulus have whetted appetite for risk at the dollar’s expense,” said Joe Manimbo, senior market analyst, at Western Union Business Solutions in Washington. “It’s encouraging to hear the rhetoric, but until it is signed, sealed, and delivered, the market will be skeptical,” he added.

The dollar index was last trading little changed on the day at 93.90. The index hit a two-month high last Friday.

Tuesday’s highly contentious debate between U.S. President Donald Trump and Democratic challenger Joe Biden boosted the dollar earlier, as it reinforced concerns that the outcome of the Nov. 3 presidential election could be contested.

Trump and Biden battled fiercely over the Republican incumbent’s record on the coronavirus pandemic, health care and the economy in a chaotic and ill-tempered first debate marked by personal insults and Trump’s repeated interruptions.

“The debate just confirmed that the election would be pretty much contested if it’s anywhere close,” said Edward Moya, senior market analyst at OANDA in New York. The greenback was also boosted by quarter-end and month-end portfolio rebalancing, analysts said.

Demand for dollars tends to rise at the end of quarters as portfolio rebalancing and fund transfers require currencies like the euro and sterling to be converted to dollars.

U.S. economic data was also for the most part dollar-supportive. U.S. private employers stepped up hiring in September, with private payrolls increasing by 749,000 jobs this month, the ADP National Employment Report showed on Wednesday. Data for August was revised up to show 481,000 jobs added instead of the 428,000 initially reported.

Andrew Hunter, senior U.S. economist at Capital Economics, however, said despite job gains, employment was still more than 10 million jobs below its pre-pandemic level. “A full labor market recovery remains a long way off,” he noted.

Data also showed that U.S. gross domestic product plunged at a 31.4% annualized rate in the second quarter, the deepest drop in output since the government started keeping records in 1947, based on the Commerce Department’s third estimate of GDP.

The euro was down 0.2% against the dollar at $1.1716. Overall, the dollar was set for its worst quarter since the spring of 2017, with a fall of about 3.3% as hopes for a swift recovery from the COVID-19 economic crash made investors exit safe havens and buy into riskier currencies.

The dollar fell 0.1% against the yen to 105.55.

The Australian dollar rose 0.6% against the greenback to US$0.7166. The New Zealand dollar gained 0.5% to US$0.6621. Against the Canadian dollar, the U.S. dollar fell 0.5% C$1.3319 .

Sep 23, 2020

Currencies | The Dollar: Dollar gains keep gold pressured near 6-week low


2-3 minutes - Source: CNBC

A stack of U.S. $100 bills being counted.

A stack of U.S. $100 bills being counted.

Bay Ismoyo | AFP | Getty Images

Gold extended losses to its lowest since mid-August on Wednesday as the dollar advanced, with investors awaiting further response from major central banks as economic uncertainty looms.

Spot gold dipped 1.5% to $1,870.11 per ounce, having hit its lowest since Aug. 12 at $1,865.03. U.S. gold futures declined 1.8% to $1,873.20 per ounce.

“Gold is currently taking its cue from the dollar ... and the dollar strength continues to weigh on gold,” said Standard Chartered analyst Suki Cooper.
“We could see a retest of the lows from early August, the next technical support level thereafter is around $1,840 per ounce, however prices are closing in on oversold territory.” The dollar index hit an eight-week high, dimming the appeal of bullion to holders of other currencies.
Gold prices declined, despite U.S. stocks retreating after data showed U.S. business activity nudged down in September.

“Long-term uncertainties are still looming and no investor would lose the opportunity of adding gold to their portfolio when prices are low,” Phillip Streible, a senior market strategist for RJO Futures in Chicago said.

“Investors are waiting and watching what the major central banks will do next. At this moment most of the monetary and fiscal policies available have already been implemented.”

Policymakers “are not even going to begin thinking” about raising interest rates until inflation hits 2%, Federal Reserve Vice Chair Richard Clarida said on Wednesday.

Meanwhile, Cleveland Federal Reserve Bank President Loretta Mester said monetary policy will need to remain accommodative for the next several years and more fiscal stimulus is needed to support the economy.

Non-yielding gold is often seen as a hedge against inflation and currency weakening.

In other metals, silver slid 4.5% to $23.31, having hit a nearly two-month low of $22.99 earlier in the session.

Platinum shed 1.3% to $855.35 per ounce, earlier touching its lowest since July 21 at $845.50, and palladium

rose 1% to $2,242.72.

Sep 21, 2020

Currencies | The Dollar: Dollar jumps as stocks tumble; rising COVID-19 cases dent risk appetite


3-4 minutes - Source: CNBC

U.S. dollar banknotes.

U.S. dollar banknotes.

Liu Jie | Xinhua via Getty

The U.S. dollar index soared on Monday and riskier currencies fell as investors looked for safety while stock markets around the world tumbled on fears of the economic implications of rising COVID-19 cases.

The euro and the Australian dollar fell against the greenback, and equities on Wall Street followed Asian and European stock markets lower, as the threat of new pandemic-related lockdowns prompted concerns about the global recovery.

U.S. investors fretted about the ability of U.S. Congress to reach an agreement for more fiscal stimulus.

“What we’re seeing here this morning for the dollar is largely a risk-off safe haven bid,” said Erik Bregar, head of FX strategy at Exchange Bank of Canada in Toronto, adding that the trigger was in the European morning on rising fears of a new U.K. nationwide lockdown.
“It’s scary stuff that reminds you of March,” he said.

The dollar - subdued during Asian hours - perked up in London trade as European stocks sank to two-week lows and U.S. stock futures fell.
The index that measures the greenback against a basket of peer currencies was last up 0.64% at 93.555.


The greenback also managed to bounce back from a six-month low to turn flat against Japan’s yen, which last traded at 104.56 against the dollar after earlier hitting 104.00, which was its lowest point since March 12.

“If it takes out the 104 level vis-à-vis the dollar, it (yen) can really take off and then all eyes are going to be on the Bank of Japan because they wouldn’t like it one bit,” said Exchange Bank of Canada’s Bregar.

Marshall Gittler, head of research at BDSwiss, said the yen’s rise was part of a typical “risk-off” move in FX markets with the exception of the Swiss franc, which turned weaker.

“With the pickup in foreign bond yields for Japanese investors getting less and less, capital flows out of Japan may fall even further,” he said. Key for the U.S. currency’s direction this week will be a slew of Federal Reserve speakers, who may shed light on the U.S. central bank’s new approach to inflation.

Fed Chairman Jerome Powell is due to appear before Congressional committees, while Fed committee members Lael Brainard, Charles Evans, Raphael Bostic, James Bullard, Mary Daly and John Williams are also making public speeches.

“If Jerome Powell and the rest of the Fed speakers don’t really add more meat to the Fed plans for how it’s going to reach an average 2% inflation I could see the U.S. dollar trading even higher this week,” said Bregar at Exchange Bank of Canada.

The euro traded 0.8% lower than the dollar at $1.1743 . Sterling also fell 0.9% to trade at $1.28 as the dollar gained steam. The Australian dollar traded down 1.2% against the greenback at US$0.7204, while the New Zealand dollar was down 1.5% at $0.6658.

Nov 12, 2019

EU - FX: Dollar stalls after Trump speech reveals little on trade

3minutos - Source: CNBC

GP Chinese Yuan - USD 190807
U.S. one-hundred dollar banknotes and Chinese one-hundred yuan banknotes are arranged for a photograph in Hong Kong on April 15, 2019.
Paul Yeung | Bloomberg | Getty Images
The dollar was little changed after U.S. President Donald Trump in a speech on Tuesday offered no new details on the state of the administration’s trade war with China.
The dollar index held onto modest gains made earlier on Tuesday, but was last trading at 98.310 against a basket of six currencies, up 0.11% on the day, and a hair above 98.304, its level at noon when Trump’s remarks began.
Speaking at The Economic Club of New York, Trump instead took aim once again at the Federal Reserve, bemoaning the fact that the United States has higher interest rates than other developed economies.
“Give me some of that. Give me some of that money. I want some of that money. Our Federal Reserve doesn’t let us do it.”
The speech was highly anticipated by the foreign exchange market, which has moved with trade headlines. The paucity of details on trade in itself was seen by some as a pessimistic signal.
“I don’t think we’ve learned anything new from Trump’s speech. The only thing that’s maybe new is that he did not announce a date and a time for a signing ceremony. Where markets had been hoping for that, those hopes were dashed,” said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets.
“We had a little bit of a fade in risky assets when he started talking and it was confirmed that he was not about to announce phase one.”
The S&P 500 index fell as Trump spoke, though remained positive on the day. The Dow and Nasdaq indexes had also fallen. Some of that risk-off sentiment was seen boosting safe-haven assets modestly. The dollar was 0.08% weaker against the Japanese yen and 0.09% lower versus the Swiss franc.
The dollar was lifted last week when comments from the Chinese trade ministry were interpreted as a sign of progress on rolling back China-U.S. tariffs, causing traders to dump safe-haven currencies like the yen. However, uncertainty hit again on Friday when Trump said that he had not agreed to reduce tariffs.
The offshore Chinese yuan was weaker against the dollar at 7.018, down 0.17%. The threshold of 7 yuan per dollar was crossed for the first time in August. The yuan had also weakened earlier Tuesday on political unrest in Hong Kong and after weak economic data in mainland China.

Oct 29, 2019

EU - FX | Currencies: Dollar slips against euro before Fed decision; sterling dips

2-3 minutos - Source: CNBC

GP: U.S. Dollars 180305
A hand holding U.S. dollar banknotes in China on January 25, 2018.
Zhang Peng | LightRocket | Getty Images
The dollar dipped against the euro on Tuesday, a day before the Federal Reserve was expected to cut U.S. interest rates, while sterling dipped as Britain looked likely to go to election in December.
Investors will watch the conclusion of the U.S. central bank’s two-day meeting, and the dollar may gain if the Fed indicates reluctance to cut rates more.
Were looking for a hawkish reaction, which would lean toward a stronger dollar, said Mark McComick, North American head of FX strategy at TD Securities in Toronto. Given that markets are looking for the Fed to prop up the economy over the coming months, I think them signaling a little bit of a pause would kind of reinforce some consolidation in the dollar, especially against euro and sterling which have been driven by the Brexit euphoria, he said.
Increasing optimism that Britain will reach a deal to avoid a disorderly exit from the European Union has supported the euro and sterling recently. Still, the pound dipped on Tuesday in choppy trading after Prime Minister Boris Johnson won parliament’s preliminary approval to hold Britain’s first December election in almost a century in a bid to break the Brexit deadlock.
On Monday, the EU agreed to a three-month flexible delay to Britain’s departure. Sterling fell 0.04% against the dollar to $1.2857. It has risen from $1.2193 on Oct. 8, but is below a five-month high of $1.3012 reached on Oct. 21.
The Australian dollar climbed for a third straight session against the greenback on growing hopes for a U.S.-China trade agreement. Australia’s economy is highly correlated to China’s and on Monday, U.S. President Donald Trump said he expected to sign a significant part of the trade deal ahead of schedule.
The dollar index against a basket of six major currencies fell after data showed U.S. consumer confidence unexpectedly fell in October.

Oct 3, 2019

EU - FX | Currencies: Dollar tumbles after weak US services data

3-4 minutes - Source: CNBC

GP: Cash transaction retail store paying checkout dollars 191003
Customer paying cash at the checkout counter.
Glow Images | Getty Images
The dollar fell to a four-week low against the yen and a one-week trough versus the euro on Thursday, as investors fretted that weakness in both U.S. manufacturing and service sectors could lead to a slowdown in the world’s largest economy.
“It appears that the U.S. is now catching down with rest of the G10,” said Ranko Berich, head of market analysis at Monex Europe in London. “So although it’s not a surprise that major G10 economies are seeing a manufacturing shock and it is spreading to the rest of their economies, it is new information that we are now seeing this dynamic emerge in the United States,” he added.
Expectations that the U.S. economy would continue to outperform other major economies and put pressure on the Federal Reserve to slow its interest rate cutting cycle were dampened this week after weak manufacturing and service sector surveys.
Data on Thursday showed that the Institute for Supply Management’s services sector index fell to 52.6 in September from 56.4 the previous month. The survey’s employment index slid to 50.4 from 53.1 in August. September’s employment index was the lowest since February 2014.
The U.S. services data followed Tuesday’s U.S. manufacturing report, which presented a dire picture of the sector, with the ISM reading falling to its lowest level in more than 10 years.
In midmorning trading, the dollar was down 0.4% against the yen, at 106.75 yen, falling to its lowest level in four weeks at 108.49 right after the ISM non-manufacturing report.
The dollar index fell 0.3% to 98.74, with the euro up 0.2% at $1.0983. The euro rose to a one-week high of $1.0999 after the data.
Investors are now waiting for Friday’s employment report to confirm or quell recession worries. Rate futures have factored in another 25 basis-point easing at the upcoming Federal Reserve policy meeting later this month following weakness in the U.S. manufacturing data. Chances for a cut have jumped to nearly 75% after the market largely ruled out the move after what seemed like a hawkish cut last month.
“It’s increasingly difficult for the hawkish members of the Fed to argue that what we’re seeing is a transitory disruption in the survey data,” Monex’s Berich said.
The dollar has broadly gained in recent weeks as investors added long positions on expectations that other major economies, led by Europe, will underperform the United States. Latest futures data show long dollar bets at a 3-month high.
Elsewhere, sterling rallied 0.9% against the dollar to $1.24 after the head of a group of euroskeptic lawmakers in Prime Minister Boris Johnson’s Conservative Party said on Thursday the government’s latest Brexit proposals offered the possibility of a “tolerable deal”.

Sep 26, 2019

EU - FX | Currencies: Dollar hits highest level in two years

3 minutes - Source: CNBC

GP: Dollar yuan notes 171026
U.S. dollar and Chinese yuan bank notes are arranged for a photograph on September 7, 2017, in Hong Kong
StudioEAST | Getty Images
The dollar index hit it highest level in two years on Thursday, after sizeable gains from the previous session.
The dollar index, which measures the greenback against a basket of other currencies, rose to 99.11, its highest level of 2019 and in two years.
On Wednesday the index jumped 0.7%, its largest one-day rise in about three months.
“While there’s no single reason to explain the dollar’s strength, multiple factors are in play,” said Hussein Sayed, analyst at broker FXTM.
“The UK is facing a political crisis with Brexit, the euro zone is near a recession, bond yields across the developed economies remain very depressed, and investors want a safe place to park their money,” he said.
“Despite the impeachment drama, the U.S. dollar continues to cement its place as the major safe haven currency,” he added.
Increased political tensions on both sides of the Atlantic - an unfolding effort by U.S. congressional Democrats to impeach President Donald Trump and ongoing uncertainty linked to Britain’s divorce from the European Union - was, however, likely to keep the greenback in demand, analysts said.
The euro was 0.16% higher against the dollar at $1.0959, after falling as low as $1.0923, its weakest since May 2017.
Despite the opening of an impeachment inquiry into U.S. President Donald Trump this week and mixed signals on a trade deal, the dollar has remained resilient. It has been in demand both as a safe-haven when investors become nervous, and also when a deal with China - and a boost to the global economy - seems within reach.
The U.S. dollar remains king and the barrage of headlines from all over the map have only served to solidify that stance, Brad Bechtel, global head of FX at Jefferies, said in a note.
Against the Japanese yen, which attracts investors in times of uncertainty, the greenback fell 0.25% after the U.S. House Intelligence Committee released a declassifed version of a whistleblower report alleging that President Trump used his office to solicit interference in the 2020 presidential election from a foreign country.
Meanwhile, the New Zealand dollar gained 0.73% after the country’s central bank governor said it was unlikely he would need to use unconventional monetary policy.
Sterling recovered from a sharp dive on Wednesday to trade unchanged on the day, even as investors waited for parliament’s next step to break the Brexit impasse and as opposition leaders gathered to discuss tactics.

Sep 18, 2019

EU - FX | Currencies: Dollar gains as Fed cuts rates, but easing outlook uncertain

3 minutes - Source: CNBC

GP: US dollar notes 180430
U.S. dollar bank notes are arranged for a photograph on September 7, 2017 in Hong Kong.
studioEAST | Getty Images
The dollar firmed on Wednesday after the Federal Reserve cut interest rates by a quarter of a percentage point, as expected, but gave an uncertain outlook on future easing.
The dollar index, tracking the unit against a basket of other currencies, was up 0.35% at 98.60. The dollar touched session peaks against the yen after the Fed decision, rising in seven of the last eight sessions.

In cutting interest rates by 25 basis points for the second time this year, the Fed gave a nod to ongoing global risks and “weakened” business investment and exports. But new projections showed policymakers at the median expected rates to stay within the new range through 2020.
However, in a sign of ongoing divisions within the Fed, seven of 17 policymakers projected one more quarter-point rate cut in 2019.
“Another rate cut from the Fed to try to shield the U.S. economy from global headwinds. Today’s move was more of a hawkish easing in that the Feds median forecasts for rates suggested no more cuts this year, while some officials dissented,” said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington. “The tone of the Fed’s new forecasts remained largely sanguine despite the global risks. Consequently, the dollar isn’t likely to stray far from recent highs.”
The euro fell 0.3% to $1.1031 Aside from cutting interest rates, the Fed changed two key rates used to manage its main policy lever. It lowered the interest it pays on excess bank reserves (IOER) by 30 basis points, to 1.80%. The rate now sits 20 basis points below the top of the target range, compared to 15 basis points previously.
The Fed also set its offering rate for any necessary operations in the $2.2 trillion repurchase agreement, or repo, market, at 1.70%, five basis points below the bottom of the new target range for the policy rate.
The changes came after turmoil this week in funding markets briefly pushed the overnight bank-to-bank lending rates above the U.S. central bank’s target range.
After the Fed releases its policy decision, attention will turn to the Bank of Japan’s meeting ending on Thursday, to see whether it eases policy, too. Deepening negative rates will be an option if the BOJ eases, although the central bank may accompany that with measures to mitigate the pain on financial institutions, sources have told Reuters.

Sep 9, 2019

EU - FX | Currencies: Euro remains subdued before key ECB meeting this week

3-4 minutes - Source: CNBC

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The euro fell to a five-day low against the dollar Monday as investors remained convinced the European Central Bank would introduce a new wave of monetary policy stimulus at its meeting on Thursday.
Leveraged funds have increased their net short positions on the euro, expecting the ECB to cut interest rates, announce it will buy government bonds or other European assets, or both.
Other global central banks are already loosening monetary policy, including the People’s Bank of China, which on Friday cut the amount of cash that banks must hold as reserves.
“ECB watchers are confident there could be a 20 bps cut and so the potential surprise (for the euro) on the rate cut isn’t that big,” said Esther Maria Reichelt, a Commerzbank analyst.
“It’s far more difficult to assess what kind of unconventional measures” the ECB could use to stimulate the euro zone economy, which “could have a far bigger impact on the euro,” Reichelt said.
Money markets are pricing in a 72% chance the ECB will cut rates by 20 basis points on Thursday, lower expectations than last week. Some analysts suggest the ECB will start buying euro zone equities, not just government bonds, in a new wave of quantitative easing.
The euro was neutral against the dollar in early London trade at $1.1033. It slipped to $1.10155 overnight, its weakest since Sept. 4.
Hedge funds have added more short euro positions, taking the amount of contracts to $6.74 billion in the week to Sept. 3, the highest in a month, though positions were not as big as in April.
The dollar index, which tracks the U.S. currency against six other currencies, was flat at 98.438. The dollar was confined to a narrow range against the yen as traders weighed the prospect of U.S. rate cuts against their demand for safe-haven assets. Dollar/yen was last flat at 106.93.
The Federal Reserve will continue to act “as appropriate” to sustain the U.S. economic expansion, Fed Chair Jerome Powell said Friday in Zurich, bolstering expectations for a rate cut at the Fed’s meeting on Sept. 18.
Elsewhere, the Australian dollar, a proxy for risk, jumped to a five-week high of 0.68625 against the U.S. dollar as traders became more optimistic that China would withstand the impact of trade disputes with the United States, after its central bank cut its reserve rate ratio.
The New Zealand dollar held onto gains, trading at 0.6419 against the U.S. dollar, not far from the four-week high of 0.6444 it reached on Friday.
Sterling was down 0.4% at $1.2235 as traders waited to see whether the British parliament would vote to hold an early general election before the Oct. 31 Brexit deadline. If a snap election were held and the Conservative Party won, it could scrap recent legislation to extend Britain’s exit from the European Union for a third time. Against the euro, sterling was 0.5% lower at 90.13.

Sep 3, 2019

EU - FX | Currencies: Euro slides to lowest since 2017 on investors eye ECB cuts, dollar strength

3-4 minutes - Source: CNBC

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Frank van den Bergh | E+ | Getty Images
The euro plunged to a 28-month low against the dollar on Tuesday as investors priced in deeper negative interest rates for longer in the euro zone.
The common currency’s drop also came on the back of a strengthening dollar as the trade spat between Washington and Beijing intensified and traders turned to buying U.S. assets as safe-haven investments without hedging their dollar currency exposure, analysts said.
Money markets have increased to more than 80% the probability that the European Central Bank will cut its benchmark rate by 20 basis points when it meets next week.
The ECB benchmark rate now stands at minus 0.40% and it has all but promised a monetary policy stimulus package as economic growth falters. Monday’s PMI survey showed European manufacturing contracted for seven straight months.
The euro was last down by 0.3% at $1.0936. It fell to $1.0926 earlier, its lowest since mid-May 2017. A break below the key $1.1000 level last week had sparked heavier sell-offs.
Against an index of its six major rivals, the dollar rose to 99.37 on Tuesday, the highest since mid-May 2017, as investors became more gloomy about the global economy’s prospects amid the U.S.-China trade dispute.
Bloomberg News reported that Chinese and U.S. officials are struggling to agree a schedule for a round of trade negotiations that had been expected this month.
Overseas investors dived into buying U.S. Treasuries, considered the most liquid and safe investment in tumultuous times.
The 10-year Treasury bond yield fell 2.5 basis points to 1.48% on Tuesday, close to the low of $1.44% it reached last week that was last seen in mid-2016.
The flows have boosted the dollar, but investors’ decision to either buy Treasuries unhedged, or trim some of their currency hedges has intensified the gains in the greenback, said Richard Falkenhall, senior forex strategist at SEB.
Higher government bonds in the United States compared with the rest of the developed world makes it worthless to buy U.S. government bonds to overseas investors if they also buy protection against unexpected swings in the U.S. currency.
“The dollar tends to outperform all other currencies except the yen” when the global economy slows down, said Falkenhall.
“Everything is going in the same direction pointing to a stronger dollar,” he said.


The euro could get some relief if the 5-Star Movement and the Democratic Party form a coalition government in Italy, analysts said. 5-Star members will vote on Tuesday on forming a coalition with PD.
“If the vote succeeds, the euro could gain somewhat,” MUFG analysts said in a note, adding that “Italian assets like bonds and stocks would likely rally somewhat further”.
Elsewhere, the pound fell to its lowest in nearly three years on Tuesday as British lawmakers prepared to vote on the first stage of their plan to block Prime Minister Boris Johnson from pursuing a no-deal Brexit.
Sterling was last down 0.4% at $1.2012 after falling to $1.1959, the lowest since October 2016, when it plunged to $1.1491 in a flash crash. Against the euro, sterling touched a two-week low of 91.47 pence.

Aug 29, 2019

EU - FX I Currencies: Dollar stable with eased trade tensions

3 minutes - Source: CNBC

The U.S. dollar was modestly higher on Thursday as news Washington and Beijing were discussing negotiations in September eased anxieties about the ongoing trade war.
The world's two largest economies are in talks about the next round of face-to-face meetings, but hopes for progress hinge on whether Washington can create favorable conditions, China's commerce minister said on Thursday. He also expressed hope the United States would cancel the additional tariffs set to go into effect on Sept. 1.
Thursday saw a slight bid for riskier assets, sending safe-havens such as the Japanese yen and Swiss franc lower and Treasury bond yields higher. The dollar index , which measures the currency against a basket of six rivals, has held up despite a dramatic escalation in tariffs last week, and was last up 0.20% to 98.406.
U.S. President Donald Trump on Friday said he would heap an additional duty of 5% on about $550 billion in targeted Chinese goods. The move came hours after China had unveiled retaliatory tariffs on $75-billion worth of U.S. goods.
"It looks like it's headed towards a quiet lack of agreement, as opposed to Twitter wars. With that quiet lack of agreement, it is probably enough to allow emerging currencies to stabilize as well as some of the commodity currencies like CAD and Aussie," said Gregory Anderson, global head of foreign exchange strategy at BMO Capital Markets.
Against the greenback, the yen was 0.31% weaker to 106.44, but was on track for a more than 2% rise against the dollar for the month of August.
The dollar was little moved by news Thursday the U.S. economy slowed slightly more than expected in the second quarter, despite the strongest growth in consumer spending in 4-1/2 years.
"The numbers were pretty close to on the screws so in the major exchange rates we didn't see much of a reaction," Anderson said.
Sterling remained in the spotlight after Prime Minister Boris Johnson's plan to suspend parliament raised the odds of a no-deal Brexit. The British currency edged 0.16% lower to $1.2189, approaching a January 2017 low below $1.2015.
"Brexit is a big deal. We've got a big week next week on that issue. And I think that increasingly it will be the factor that drives markets as opposed to U.S.-China trade spat headlines," said Anderson.

Aug 28, 2019

EU - FX | Currencies: Dollar ticks up, but yen holds gains as recession fears grow

3 minutes - Source: CNBC

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John Phillips | Digital Editor for
The U.S. dollar was modestly higher against the yen on Wednesday morning, but the move indicated little change in investor sentiment as the Japanese currency largely clung to its recent gains on growing fears of a global economic downturn.
The yen stood at 105.83 per dollar, 0.10% weaker on the day, but nevertheless close to the 2-1/2-year high of 104.44 hit on Monday as renewed trade tension sent investors into safe-haven assets like the Japanese currency and government bonds.
Two-year U.S. government bond yields rose further above 10-year yields, a deepening of the yield-curve inversion, a widely recognized signal of coming recession. Investors are worried that the trade conflict between the United States and China could tip the world into an economic slowdown.
“Much, if not all, of the decline in dollar/yen is simply down to markets becoming more risk-averse,” said Adam Cole, currency strategist at RBC Capital Markets.
The dollar bid on Wednesday however, was unlikely to be the result of a risk-off move.
“This supports our view that as bad as the risks have gotten in the U.S., the rest of the world looks even shakier. Risks of hard Brexit continue to rise, while Italian political drama continues,” said Win Thin, global head of currency strategy at Brown Brothers Harriman, referring to the potential for the UK to leave the European Union without a deal on Oct. 31.
The dollar index, which measures the U.S. currency against a basket of six currencies, rose 0.19% to 98.186. The Chinese yuan edged lower to 7.1690 in offshore markets, not far from the record low of 7.186 it touched on Monday.
Elsewhere, sterling slumped as much as 1% against the euro and the dollar on British Prime Minister Boris Johnson’s move to limit parliament’s opportunity to derail his Brexit plans.
A government source said the prime minister, who has vowed to take Britain out of the EU without a divorce deal if necessary, would set an Oct. 14 date for the Queen’s Speech: the formal state opening of a new session of parliament.
That would effectively shut parliament starting in mid-September for around a month and reduce the parliamentary time in which lawmakers could try to block a no-deal Brexit.
Sterling was last down 0.68% at $1.2204 and 0.62% lower versus the euro at 90.77 pence, just off the day’s lows.
The euro was slightly weaker against the dollar, down 0.11% at $1.1078 with little in the way of new economic data scheduled for Wednesday or developments to spark bigger moves.

Aug 27, 2019

EU FX | Currencies: Yen rises as investors flock to safe-haven assets

3-4 minutes - Source: CNBC

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People are reflected on a window of a currency exchange in Buenos Aires’ financial district, Argentina, September 3, 2018.
Marcos Brindicci | Reuters
The Japanese yen rose and 10-year Treasury yields fell on Tuesday as investors fled to safer assets amid worries the U.S.-China trade conflict would get worse, days after both sides announced new tariffs.
On Friday, China said it would increase tariffs on $75 billion worth of American goods. The United States retaliated by saying it would raise existing tariffs on $250 billion worth of Chinese goods to 30% from 25% on Oct. 1.
U.S. President Donald Trump also said he would tax another $300 billion worth of Chinese imports 15%, rather than the 10% he had planned. Those levies go into effect on Sept. 1.
On Monday, speaking on the sidelines of the G-7 summit of world leaders in France, Trump said Chinese officials had contacted U.S. trade counterparts overnight and offered to return to the negotiating table.
Trump’s comments sparked a wave of so-called risk-on trades, which initially boosted the dollar, weakened safe-haven currencies, and lifted stock markets.
However, doubts crept in after a Chinese Foreign Ministry spokesman said he was unaware that a phone call had taken place. The Commerce Ministry, which typically releases statements on trade calls, did not respond to a request for comment.
“The yen has been one of the best-performing global currencies this year and continues to benefit from building downside risks to global growth from escalating trade tensions,” said Lee Hardman, currency analyst at MUFG.
The Japanese currency was last up by 0.5% at 105.63 against the dollar. That wasn’t as strong as Monday’s gain, when it reached a three-year high, excluding the January flash crash. The yen has gained 3.6% against the dollars as the trade war drove traders to safe-haven assets.
The yen is “likely to strengthen further if tensions continue to build,” Hardman said.
Ten-year U.S. Treasury yields fell to 1.5097%, keeping the yield curve inverted as two-year yields traded at 1.5264%, a sign of an impending recession.
The offshore Chinese yuan, sensitive to U.S.-China trade disputes, was lower Tuesday after plunging to a record low of 7.1870 against the dollar the day before. It last traded down 0.1% at 7.1770.
China’s central bank lowered its official yuan midpoint to an 11-1/2-year low on Tuesday, but stronger than traders had expected.
The Turkish lira was down by 0.4% at 5.8452 against the dollar, having plunged Monday by more than 10% in a second flash crash this year.
Elsewhere, major currencies were relatively stable.
The euro was up by 0.1% at $1.1113 and the index that tracks the dollar against six other currencies was l down 0.2% at 97.898.
The pound was up 0.2% at $1.2242 and 0.1% against the euro at 90.765 pence.

Aug 26, 2019

EU - FX | Currencies: Dollar firms as US, China throttle back trade tensions

3 minutes - Source: CNBC

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A clerk of ICBC bank counts Chinese 100 yuan at its branch in Beijing.
Kim Kyung-Hoon | Reuters
The U.S. dollar strengthened on Monday morning, recovering from overnight losses after the United States and China sought to ease trade war tensions.
President Donald Trump, on the sidelines of the G7 summit of world leaders in France, said Chinese officials had contacted U.S. trade counterparts overnight and offered to return to the negotiating table. Vice Premier Liu He, who has been leading the talks with Washington, said China was willing to resolve the trade dispute through “calm” negotiations.
In overnight trade prior to these remarks, China’s yuan had fallen to an 11-year low in the onshore market and a record low offshore and the U.S. dollar fell to a 2-1/2 year low against the Japanese yen.
The currency market had been reacting to Trump’s announcement on Friday of an additional 5% duty on $550 billion in targeted Chinese goods, hours after Beijing unveiled retaliatory tariffs on $75 billion worth of U.S. products, sending stocks into a tailspin and investors rushing for the safety of bond markets.
Trump on Monday sought to limit the fallout and smooth tensions, helping the yuan come off its lows. The dollar index recovered, last up 0.4% at 98.03.
“It has been a bit of a roller coaster. We had the dollar opening up quite weak in Asia last night. Then a number of things have happened to reverse that including dollar/CNH pushing higher,” said Daniel Katzive, head of foreign exchange strategy for North America at BNP Paribas.
“Of course, most importantly,” he said, were “the more optimistic comments from the president on the China trade relationship.”
In China’s onshore market, the yuan fell to 7.1540 per dollar, the lowest since February 2008.
In the offshore market, the yuan slid to as low as 7.1858 yuan, the weakest since international trading in the currency began in 2010, before recovering to 7.1635 yuan - down 0.43% on the day - after Trump’s upbeat comments.
In a sign that some calm had returned to markets, the Japanese yen - which investors regard as a safe-haven - fell 0.57% to 105.99, having earlier hit a 2-1/2-year high of 104.44.
“I think market uncertainty around trade is going to remain very elevated in the best case scenarios. It should ultimately mean that currency pairs like dollar/yen continues to push lower because Japanese investors have big exposures to global markets and if markets are more volatile, they’ll be more cautious about maintaining their FX exposure,” said Katzive.

Aug 21, 2019

EU FX I Currencies: Dollar gains vs yen, Swiss franc as risk sentiment improves

3-4 minutes

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U.S. dollar, British pound and euro notes.
Matt Cardy | Getty Images
The dollar rose against the safe-haven yen and Swiss Franc on Wednesday, as risk appetite further improved with global stocks and U.S. yields higher ahead of an annual Federal Reserve gathering later this week in Jackson Hole, Wyoming and a summit of major central banks this weekend.
Market participants are waiting for any statement from the Fed and other global monetary authorities meeting at a Group of Seven summit this weekend on possible measures to lift slumping economies around the world.
Fed Chairman Jerome Powell’s highly-anticipated speech in Jackson Hole on Friday comes after last week’s inversion of the U.S. yield curve - widely regarded as a recession signal. The curve inversion has boosted expectations of another interest rate cut at its September policy meeting.
The interest rate futures market has priced in 100 basis points of easing over the next year. Despite market expectations of a major speech from Powell, Ranko Berich, head of market analysis, at Monex Europe in London believes the Fed chief is unlikely to make any big pronouncement in Jackson Hole.
“At the moment, the Federal Reserve is hyper-conscious of the fact that the president of the United States is doing everything in his power to politicize monetary policy-making,” said Berich. “What we’re seeing from Powell’s policies is to push from that politicizing very strongly, so a big pontification speech at Jackson Hole is the complete opposite of what he’s trying to achieve at the moment,” he added.
Instead, Berich thinks Powell will reiterate his past comments that the U.S. economy is strong, the Fed is easing out of an abundance of caution, and he doesn’t see any upside risks to inflation.
In morning trading, the dollar rose 0.2% against the yen to 106.43 yen, gaining in four of the last five sessions.
Against the Swiss franc, the dollar climbed 0.3% to 0.9808 franc.
The dollar has also been supported by talk of more spending. U.S. President Donald Trump said on Tuesday his administration was considering potential tax cuts on wages as well as profits from asset sales. The Fed minutes of the last monetary policy meeting are also due out later on Wednesday, although that is being overshadowed by the Jackson Hole meeting later this week.
The euro, meanwhile, was slightly lower at $1.1096, moving little since Italy’s Prime Minister Giuseppe Conte resigned on Tuesday.
Some investors believed the move made a snap general election less likely. Credit Agricole strategist Manuel Oliveri expects the euro to strengthen towards $1.12 by September even though the European Central Bank will struggle to exceed investor expectations for cutting rates. Talk of more fiscal spending in Germany and the hit to the U.S. yield advantage from falling interest rates, should support the euro, he added.

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