Dollar Dips, Sterling Slides Again

 

cropped-cropped-shutterstock_450140326.jpgOn Monday, the greenback inched lower against a basket of the other major currencies, while sterling was suddenly lower as fears over prospects for a ‘hard Brexit’ weighed.

The U.S. dollar index, which gauges the greenback’s strong point against a trade-weighted basket of six major currencies, eased to 102.08.

After Friday’s U.S. nonfarm payrolls report for December, demand for the dollar continued to be underpinned which indicated a slowdown in hiring, but the fastest wage progress in more than seven years, supported the case for rate hikes this year.

The Fed Reserve increased interest rates in December and indicated that it anticipates to hike rates three more times in 2017.

Higher rates increase the greenback  by making the currency more attractive to yield-seeking investors.

On Monday, Boston Fed President Eric Rosengren called for the U.S. central bank to step up the pace of interest rate increases, notice that inflation could overshoot its target if it does not.

The greenback was lower compared to the yen, with USD/JPY is sliding 0.45% to 116.48, down from an intra-day high of 117.53.

The euro pushed higher, with EUR/USD increases 0.2% to 1.0554.

The pound was suddenly lower compared to the greenback and the euro, with GBP/USD hitting lows of 1.2125, the lowest level since October 28, before pulling back to 1.2144.

EUR/GBP hit peaks of 0.8690, the strongest level since November 15 and was previously at 0.8688, up 1.33% for the day.

The selloff in sterling came after British Prime Minister Teresa May stated on  Sunday that the country would not be keeping “bits” of European Union membership.

The statements were seen as a sign that the UK won’t try to negotiate continued full access to the European single market when it exit the European Union.

Sterling unsuccessful to find support after May stated on Monday it was wrong to say a “hard Brexit” was inevitable.

Somewhere else, “the Turkish lira fell to a fresh record low against the dollar on Monday after ratings agency Moody’s said that bank profits will be hit by an increase in bad loans this year and warned of a “general worsening” in the investment climate in the country.,” according to the report.

After starting the day at 3.6433, USD/TRY  jumped 2.48% to trade at 3.7342.

On Additional News

On Tuesday, the greenback slipped as the yuan steadied on a jump in Chinese factory gate prices.

The dollar index declined 0.16% to 101.76 at 02:15 ET. It was flat at the 6.88 yuan mark.
China’s PPI was up 5.5% in the December vs. forecast rise of 4.5%.

That was the fastest pace of development in Chinese factory gate prices in five years as commodity price increases.

This year, the Chinese statistic could increase expectations of global reflation. The greenback  fell back to the 115 level against the yen.

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Dollar Resumes Increase, Asia Shares Inch up in Positive Start to 2017

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On Tuesday, Global market marched confidently in 2017 with Asian stocks extending gains after European shares increased to their peaks in a year, while the greenback restarted its hike after the previous week’s stumble.

Markets were sustained by indications of solid factory development  in China and Europe, giving the global manufacturing sector a solid improvement heading into the new year.

MSCI’s broadest index of Asia-Pacific shares outside Japan increased 0.4% as most regional markets resumed after the New Year holiday. It ended 2016 with a 3.7% increase, its best year in four.

For an extended New Year holiday, Japan was closed.

Australian shares (AXJO) were the best performers in the region with a 1.2% increase. Hong Kong’s Hang Seng (HIS) increase 0.5%.

In China, both the CSI 300 index (CS1300) and the Shanghai Composite (SSEC) saw a 0.8 % increase. China was Asia’s poorest performing major stock market in 2016 with a 11.3% loss in its worst year in five.

A private business survey showed China’s factory activity increased more than projected in December as demand accelerated, with production reaching a near six-year peak.

“A year ago, the Chinese markets kept everyone on their toes,” said Jingyi Pan, market strategist at IG in Singapore, referring to market turmoil in China that engulfed global investors last January.

“I don’t think that we will see a repeat given that the global economy has a better foothold compared to a year ago,” Pan said.

“Nevertheless, the market is always adjusting and will likely recognize that the full year growth results and clarity into (U.S.) President-elect Donald Trump’s policies will influence market direction in the near term.”

The dollar index which tracks the dollar against a basket of six global peers, increase 0.5%, its biggest one-day advance since Dec. 15, as the outlook of higher U.S. interest rates kept sentiment bullish.

On Tuesday, the greenback  dragged back 0.1% to 117.38 yen, after jumping nearly 0.6% on Monday, its biggest one-day increase  in over  two weeks.

“Following a period of consolidation between now and late January, we believe the USD will put on another 10 percent of gains over the next eighteen months,” said Richard Grace, chief currency strategist at Commonwealth Bank of Australia.

U.S. S&P futures increase 0.3% during the Asian morning. Wall Street was closed for the New Year holiday on Monday.

On Monday, Britain and Switzerland are  also close. Europe’s STOXX 600 index added 0.5% to hit its highest level since Jan. 4, 2015.

That came on the heels of data, presenting manufacturers ramped up activity at the quickest  pace in more than five years in December.

In spite of the positive figures, the euro fell 0.6% on Monday. It inched up 0.2% to $1.0472 on Tuesday.

Investors are monitoring the Chinese yuan after the central bank almost doubled the number of foreign currencies in a basket used to set the renminbi’s value.

On Additional News

Starting on January  1, 2017, the number of currencies in the CFETS basket surged from 13 to 24, with new participants, including the Korean won, the South African Rand and the Mexican peso.

In its first fix since the change, and on Tuesday,  the Chinese central bank sets the official yuan midpoint at 6.9498 per dollar, compared with the prior close of 6.9467. It destabilized further to 6.9548 at 0303 GMT (10.03 p.m. ET).

In year 2016, the Renminbi has published its biggest yearly loss since 1994, with the greenback  up nearly 7% versus the Chinese currency.

On Saturday, China’s foreign exchange regulator stated that from Jan. 1, it would increase scrutiny on individual foreign currency purchases and toughen punishment for illegal money outflows, although the $50,000 yearly individual quota will remain unmoved.

In commodities, oil prices increased following  a historic deal between OPEC and non-OPEC producers decrease  production took effect on Jan. 1. Oil was the world’s best-performing asset class in 2016, with a gain of approximately  50%.

U.S. crude  added 0.7% to $54.07 a barrel. Global benchmark Brent (LCOc1) jumped as much as 1.8% before settling down to trade 0.6% higher at $57.18.

Gold also increases after initial losses, with the precious metal adding about approximately 0.4% $1,156.36.

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January 2 – 6 Forex Weekly Outlook

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On Friday, the greenback dropped against a basket of the other major currencies as traders gain profits in the wake of a late year rally that propelled the dollar to 14-year peaks.

The U.S. dollar index, which gauges the greenback’s strong point against a trade-weighted basket of six major currencies, declined 0.28% to 102.29 late Friday, off the 14-year peak  of 103.65 hit on December 20.

For the year, the index increased approximately 3.7% after rallying in the 4th quarter on the back of anticipations for a quicker pace of rate hikes from the Fed Reserve and surged fiscal spending under the incoming Trump administration.

The euro pressed higher in holiday thinned trade, with EUR/USD  ending at 1.0517, increase 0.29% for the day. The euro temporarily hopped as high as 1.0653 during Asian trade, the strongest level in two weeks, before retracing gains.

The single currency ended the year down 3% against the dollar, its 3rd consecutive yearly dropped.

The pound was also higher, with GBP/USD is advancing 0.71% to 1.2350 in late trade.

Sterling declined approximately 16% against the greenback  for the year during concerns over the economic fallout from the June 23 vote to leave the European Union.

The greenback was higher compared to the yen, with USD/JPY increased 0.34% at 116.95. On the year, the greenback posted its first yearly loss against the yen in five years, declining approximately 2.9%.

In the week onward, investors will be looking forward  to Friday’s U.S. employment report for December together with Wednesday’s minutes of the Fed’s December meeting.

U.S. data on manufacturing and service sector activity will also be in emphasis.

Market observers will also be in anticipation of euro zone inflation data on survey data from the UK on manufacturing, service and construction sector activity.

On Additional  News

On January 2, financial markets around the globe will be closed for the New Year holiday.

On January 3, financial markets in New Zealand and Japan will stay closed for holidays.

China is to post,it’s Caixin manufacturing PMI. In the euro zone, Germany is to release preliminary inflation statistic and a report on the adjustment in the figure of people unemployed.

The U.K. is to release survey statistic on manufacturing activity.  The Institute for Supply Management is to publish data on manufacturing activity.

On January 4, the U.K. is to publish survey data on construction activity.  The euro zone is to post preliminary data on inflation.

The Fed Reserve is to post, it’s December minutes of the meeting.

On January 5, China is to post, it’s Caixin services PMI. The U.K. is to publish survey data on service sector activity.

The U.S. is to publish the ADP nonfarm payroll report and statistic on unemployed privileges. The ISM is to report on non-manufacturing activity.

On January 6, Australia is to publish trade data. Germany is to report on factory orders and retail sales.

Canada is to post its monthly jobs report together with trade data.

The U.S. is to round up the week with the closely observed report on nonfarm payrolls along with data on trade and factory orders.

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Dollar Drops versus Yen as U.S. yields Declines, holds Steady Compared to Euro and Pound

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On Thursday, the greenback dropped against  the yen as U.S. yields decline suddenly to two-week lows, however, the dollar managed to hold steady compared to the euro and pound.

The dollar declined 0.2% at 117.070 yen, having come down from a peak of 117.815 touched overnight.

Treasury yields dropped in the wake of weaker-than-expected pending home sales statistic and a robust debt auction.

The euro slightly adjusted to $1.0420 <eur=>after losing 0.4% the prior day, during which it went as low as $1.0372.

“The dollar looks like it has run its course against the yen for now. But against the euro, the dollar still has room to gain as the pair is now trying to catch up to the widening between U.S. and German yields,” said Masafumi Yamamoto, chief forex strategist at Mizuho Securities in Tokyo.

The spread between the 10-year U.S. Treasury (US10YT=RR) and German bund (DE10YT=RR) yields is the widest on record stretching back to 1990.

The spread is increasing lately on the divergence between European and U.S. central bank policy and outlooks for development and inflation.

The common currency already touched a near 14-year low of $1.0352 the previous week and analysts assume it to eventually reach parity with the dollar the approaching  year.

Sterling was flat at $1.2229. The pound was in reach of a two-month decline of $1.2201 set overnight during fresh doubt over Britain’s Brexit negotiations.

The dollar index declined 0.15% at 103.150 (DXY), however, still in reach of a 14-year peak of 103.650 struck the previous week.

The index has moved to that level on expectations that Donald Trump’s incoming administration will increase U.S. development through fiscal stimulus, which could be accompanied by monetary tightening and higher yields.

The Australian dollar increased 0.15% at $0.7188.

On Additional  New

On Wednesday, the  euro was under pressure compared to the broadly stronger U.S. greenback during  thinning pre-New Year holiday trade, with the single currency looking set to test the lows from January 2003.

The euro declined to a session low of 1.0393 against the dollar, not far from the previous week’s 13-year low of 1.0352. The pair was previously at 1.0397 by 8:05AM ET (13:05GMT), down 0.55% on the day.

Due to the holiday period, trading volumes are expected to stay light this week, as many investors already closed book before the year end, decreasing liquidity in the market, which could exaggerate market changes.

The greenback stayed well-supported after previous day’s data indicated U.S. consumer confidence reaching  its highest level over 15 years in December, in addition to robust  housing figures.

The upbeat reports supported  underscore expectations that the Fed Reserve would increase interest rates at a faster pace the approaching  year.

For the first time in a year, the Fed Reserve hiked interest rates earlier this month and expected three more increases in 2017. In contrast, the European Central Bank stays  committed to very loose monetary policies.

Higher rates increased the greenback by making the currency more attractive to yield-seeking investors.

On Wednesday, the National Association of Realtors is to publish data on November pending home sales at 10:00AM ET (15:00GMT). The report  was expected to show pending home sales increased 0.5%  the previous  month, after edging up 0.1% in October.

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Upbeat U.S. Data Lifts Dollar vs.Yen

After  the close on Wednesday, Australia stocks were higher, as an increase in the Gold, Metal & Mining and Materials sectors led shares higher.

At the close in Australia, the S&P/ASX 200 increase 1.01% to hit a new 52-week peak.

The best performers of the session on the S&P/ ASX 200 were Resolute Mining Ltd (AX:RSG), which increased 11.06% or 0.115 points to trade at 1.155 at the close. In the meantime,Saracen Mineral Holdings Ltd (AX:SAR) added 9.70% or 0.080 points to end at 0.905 and Asaleo Care (AX:AHY) increased 7.25% or 0.100 points to 1.480 in late trade.

The poorest performers of the session were Bega Cheese Ltd (AX:BGA), which declines 2.60% or 0.110 points to trade at 4.120 at the close. Caltex Australia Ltd (AX:CTX) dropped 2.03% or 0.620 points to end at 29.980 and Myer Holdings Ltd (AX:MYR) was down 1.44% or 0.020 points to 1.370.

Rising stocks outnumbered decreasing ones on the Australian Stock Exchange by 666 to 319 and 272 ended unmoved.

The S&P/ASX 200 VIX, which gauges  the implied volatility of S&P/ASX 200 options, increased  15.42% to 12.169.

Delivery of gold for February increased 0.36% or 4.15 to $1142.95 a troy ounce. Somewhere else in commodities trading, delivery of crude oil in February dropped 0.19% or 0.10 to hit $53.80 a barrel, while the March Brent oil deal drops 0.21% or 0.12 to trade at $56.71 a barrel.

AUD/USD  increased 0.26% to 0.7205, while AUD/JPY  increased 0.41% to 84.72.

The US Dollar Index declined 0.09% at 102.91.

On Additional  News

On Wednesday, Asia stocks followed Wall Street higher, although the greenback firmed compared to the yen following the release of upbeat U.S. economic data overnight.

Crude oil prices held large increased on expectations of supply tightening once oil-producing nations implement a planned output reduction.

MSCI’s broadest index of Asia-Pacific shares outside Japan increased 0.5%.

Australian stocks (AXJO) rode a rise in commodities to increase 1 percent. Indonesian shares (JKSE) added 1.9%, while Shanghai (SSEC) shed 0.3%. Japan’s Nikkei (N225) increased 0.1 percent.

U.S. stocks had gained slightly on Tuesday, supported by upbeat consumer and housing data, with gains in technology shares lifting the Nasdaq Composite to a record close.

The greenback increased 0.1% higher at 117.600 yen. It was boosted after previous day’s data presented U.S. consumer confidence hitting its highest level in over  15 years in December, in addition to robust housing numbers.

“Until data starts to turn negative or the headlines suggest that (U.S. president-elect) Trump’s stimulus programme could fall short of expectations, the dips in the dollar will be shallow with the currency aiming for new highs,” wrote Kathy Lien, managing director of FX strategy for BK Asset Management.

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