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Dollar edges higher as Fed meets to set monetary policy

By John McCrank and Tommy Wilkes

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Dollar edges higher as Fed meets to set monetary policy
© Reuters. FILE PHOTO: A Japan Yen note in front of U.S. Dollar and British Pound Sterling notes are seen in this June 22, 2017 illustration photo. REUTERS/Thomas White/Illustration

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By John McCrank and Tommy Wilkes

NEW YORK/LONDON (Reuters) – The dollar rose slightly as the U.S. Federal Reserve prepared on Tuesday to kick off its two-day policy meeting where it was expected to announce the start of tapering of its massive asset purchases put in place at the start of the COVID-19 pandemic.

Investors in recent weeks have priced in a wave of tightening from central banks as they bet policymakers are sufficiently concerned about rising inflation to end pandemic-era levels of easing.

The Reserve Bank of Australia (RBA), in the first of several central bank meetings this week, on Tuesday sounded a more dovish tone that investors had anticipated, weakening the dollar.

The Fed announces its policy decision on Wednesday, and the Bank of England will do so on Thursday.

“The theme of inflation getting out of control and forcing central banks into action is unfolding,” said Edward Moya, a senior market analyst at Oanda.

The , which measures the greenback against a basket of peer currencies, was up 0.13% at 94.050.

The market has fully priced in the Fed’s expected tapering announcement, and will be looking for any clues as to when the central bank will begin raising rates, similar to last week’s European Central Bank meeting.

“The Fed is potentially going to do a better job than the ECB at pushing back those rate hike expectations, so I would anticipate that despite tapering, despite a possible knee-jerk move higher in yields, that we could see the dollar settle lower,” Moya said.

Australia’s central bank did not display the hawkish pivot many had expected, sending the Aussie dollar down 0.9% to $0.7452, its weakest since Oct. 19.

The RBA stressed that inflation was still too low, although it also omitted its previous projection that rates were unlikely to rise until 2024 and dropped a key target for the April 2024 government bond.

“Unlike other central banks (like the ECB recently), the RBA’s message was successful in at least marginally scaling down hawkish bets, although markets are still pricing in 76bp (basis points) of tightening in the next 12 months,” ING analysts said in a note.

Sterling was on the back foot, slipping 0.27% to $1.3626, ahead of Thursday’s Bank of England meeting, where the market is pricing in an interest rate hike.

The euro edged 0.21% lower to $1.15825.

Elsewhere, the Swiss franc briefly hit a new 18-month high versus the euro. The single currency dropped to as weak as 1.0544 francs – the lowest since May 2020 – before bouncing back to trade at 1.0581, up 0.3% on the day.

The franc has been strengthening versus the U.S. dollar, and was up 0.55% at $0.9141.

Marshall Gittler, Head of Investment Research at BDSwiss Holding, noted that sight deposits data suggested the Swiss National Bank – which worries about a stronger franc hurting the Swiss economy – was not intervening as actively to arrest the franc strength as it had during previous moves higher.

“This could be the way the SNB goes along with the global trend toward tighter monetary policy, only doing it through the exchange rate rather than through its policy rate,” he said.

Economy

South Korean exports dropped 14% in November, the highest in 2.5 years

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South Korea’s exports fell 14 percent year-on-year to $51.91 billion in November, preliminary data from the Ministry of Commerce, Industry and Energy showed. The November drop was the biggest in 2.5 years since May 2020 and was caused both by the deteriorating global economy, which even a Google price chart showed, and a truckers’ strike in the country.

South Korea exports 2022 – reasons for the drop

Exports fell for the second month in a row. Analysts on average expected an 11% decline, according to Trading Economics. Respondents to MarketWatch predicted a 10.5% decline.

Shipments of semiconductor products overseas, the country’s top export item, fell 29.8%; petrochemicals fell 26.5% and steel exports fell 10.6%. Meanwhile, exports of automobiles jumped 31% and petroleum products 26%.

Exports to China, South Korea’s largest trading partner, fell by 25.5%, and to Asian countries – by 13.9%. Below, supplies to the USA grew by 8% and to the European Union – by 0.1%.

In January-November exports rose by 7.8% on the same period last year and reached a record $629.1 billion.

South Korean imports rose 2.7% to $59.2 billion in November, marking the 23rd consecutive month of gains, but the current rate of growth is the lowest since November 2020. Experts had predicted an increase of only 0.2%.

South Korea’s trade deficit last month was $7.01 billion, compared with a surplus of $2,973 billion a year earlier.

The negative balance was recorded for the eighth month in a row. As a result, by the end of 2022, the country may record a foreign trade deficit for the first time since the financial crisis in 2008.

Earlier we reported that the UN estimates the cost of humanitarian aid in 2023 at a record $51 billion.

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Economy

The UN estimates humanitarian aid costs in 2023 at a record $51 billion because of an impending humanitarian crisis

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a humanitarian crisis

Joint humanitarian operations will require a record $51.5 billion in 2023 to address urgent problems.

The UN Office for the OCHA estimates that 339 million people will need urgent aid in 2023. At the same time, OCHA called on donor countries to provide funds for assistance in 2023 to the 230 million people most in need, living in 68 countries.

Griffiths explained that aid is needed not only for people experiencing conflicts and disease outbreaks. but also for those suffering the effects of climate change, such as people in peninsular Somalia facing drought and those in Pakistan experiencing severe flooding. For the first time, the growing humanitarian crisis has brought the number of displaced people worldwide to the 100 million mark. Also worsening an already bad situation is the worldwide coronavirus pandemic, which affects the poor. Note that the general economic crisis has begun to negatively affect even the Netflix price chart.

Earlier we reported that house prices in the UK fell by 1.4% in November.

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Economy

Average house prices in the UK fell 1.4% in November

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average house prices in the uk

Average house prices in the UK fell 1.4% in the previous month in November to 263,788 thousand pounds (about $319,000), according to the British mortgage company Nationwide Building Society.

The decline was recorded at the end of the second consecutive month and was the most significant in almost 2.5 years – since June 2020. Analysts on average had forecast a decline of only 0.3%, according to Trading Economics.

Are house prices in the UK going to fall even more?

Residential real estate prices in November compared to the same month last year increased by 4.4%. At the same time, experts expected a larger increase of 5.8%. The growth rate slowed down significantly compared with 7.2% in October. Because of the difficult economic situation, British investors are investing in other instruments. The Microsoft price chart, for example, is showing potential for growth, so many are interested in the U.S. stock market. 

“The market looks set to remain under pressure in the coming quarters. Inflation will remain high for some time, and interest rates are likely to continue to rise,” believes Nationwide Senior Economist Robert Gardner. – The outlook is unclear, and much will depend on how the overall economy behaves, but a relatively soft landing is still possible.”

Earlier we reported that Sanctions Circumvention was included in the EU’s list of criminal offenses.

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