Economy

Dollar higher on safety bid as data spurs growth worries

Published

1 year ago

June 25, 2023

The dollar rose against the euro on Friday after dismal business activity data from around the globe soured risk sentiment and as hawkish comments from central banks added to pressure on riskier currencies.

U.S. business activity fell to a three-month low in June as services growth eased for the first time this year and the contraction in the manufacturing sector deepened, closely watched survey data out Friday showed.

The overall picture, though, indicated U.S. economic growth ticked up a notch in the second quarter even as worries persist that the Federal Reserve’s aggressive interest rate increases over the past year will trigger a recession.

Earlier in the session data showed euro zone business growth virtually stalled in June. A downturn in manufacturing deepened, while activity in the bloc’s dominant services sector barely expanded, as overall demand fell for the first time since January.

“We’re starting to see signals from businesses that the demand is starting to ease up at the margin and that’s leading to recalibration of expectations of what future output looks like,” said Bipan Rai, North America head of FX strategy at CIBC Capital Markets.
“I do think that the concern with the future outlook is weighing on risk appetite right now and the dollar is catching somewhat bid off of that,” Rai said.

The euro fell 0.57% to $1.08925, a three-day low against the U.S. dollar. The dollar index, which measures the currency against six rivals, rose 0.49% to 102.89.

Traders squaring books as the end of the month and the quarter nears was also likely supporting the U.S. currency, Rai said.

Friday’s data arrived after rate hike surprises and hawkish comments from central banks globally which have renewed market fears that policymakers have further to go in tightening policy to tame inflation, even at the risk of tipping their economies into a recession.

“After bigger than expected rate hikes in the UK and Norway yesterday, the markets are nervous about upside rate surprises, and that was helping the dollar overnight, even before we saw the European PMI data,” Kit Juckes, chief FX strategist at Societe Generale, said in a note.

Fed Chair Jerome Powell said on Thursday the central bank would move interest rates at a “careful pace” from here, but ruled out interest rate cuts “happening any time soon.”

Against the yen, the dollar was up 0.44% at 143.76 yen, its strongest level in more than seven months. The Japanese currency has come under renewed pressure as the Bank of Japan (BOJ) maintains an ultra-dovish stance.

Data out on Friday showed that Japan’s core consumer inflation exceeded forecasts in May and an index excluding fuel costs rose at the fastest annual pace in 42 years, putting pressure on the BOJ to phase out its massive stimulus.

The pound was down 0.30% on Friday at $1.271, on pace to finish the week down about 1%, its largest weekly loss in six weeks.

The British currency has come under pressure from rising expectations the UK economy could slip into recession after the Bank of England on Thursday delivered an outsized rate hike in response to persistent inflation.

The Australian and New Zealand dollars struggled on Friday as traders avoided riskier currencies.

The Aussie fell 1.16% to $0.6678 and was headed for a weekly loss of nearly 3%, its worst week since late August. The kiwi slid 0.62% to $0.6139, down about 1.6% for the week.

In cryptocurrencies, bitcoin rose 3.46% to a 1-year high of $30,924, on pace for a near 17% gain for the week, its best weekly gain since mid March, boosted by BlackRock’s plan to create a bitcoin exchange-traded fund.

Economy

Russian central bank says it needs months to make sure CPI falling before rate cuts -RBC

Published

11 months ago

December 26, 2023

Russian central bank says it needs months to make sure CPI falling before rate cuts -RBC

MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.

The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.

Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.

“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.

Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.

“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.

The bank will next convene to set its benchmark rate on Feb. 16.

The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.

Economy

China identifies second set of projects in $140 billion spending plan

Published

11 months ago

December 25, 2023

China identifies second set of projects in $140 billion spending plan

© Reuters. FILE PHOTO: Workers walk past an under-construction area with completed office towers in the background, in Shenzhen’s Qianhai new district, Guangdong province, China August 25, 2023. REUTERS/David Kirton/File Photo

SHANGHAI (Reuters) – China’s top planning body said on Saturday it had identified a second batch of public investment projects, including flood control and disaster relief programmes, under a bond issuance and investment plan announced in October to boost the economy.

With the latest tranche, China has now earmarked more than 800 billion yuan of its 1 trillion yuan ($140 billion) in additional government bond issuance in the fourth quarter, as it focuses on fiscal steps to shore up the flagging economy.

The National Development and Reform Commission (NDRC) said in a statement on Saturday it had identified 9,600 projects with planned investment of more than 560 billion yuan.

China’s economy, the world’s second largest, is struggling to regain its footing post-COVID-19 as policymakers grapple with tepid consumer demand, weak exports, falling foreign investment and a deepening real estate crisis.

The 1 trillion yuan in additional bond issuance will widen China’s 2023 budget deficit ratio to around 3.8 percent from 3 percent, the state-run Xinhua news agency has said.

“Construction of the projects will improve China’s flood control system, emergency response mechanism and disaster relief capabilities, and better protect people’s lives and property, so it is very significant,” the NDRC said.

The agency said it will coordinate with other government bodies to make sure that funds are allocated speedily for investment and that high standards of quality are maintained in project construction.

($1 = 7.1315 renminbi)

Economy

Russian central bank says it needs months to make sure CPI falling before rate cuts -RBC

Published

11 months ago

December 25, 2023

Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.

“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.

Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.

“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.

The bank will next convene to set its benchmark rate on Feb. 16.

The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.