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Enel green power Italy plans to sell assets worth 21 billion euros to reduce debt

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Enel Italy stock

Enel green power Italy (BIT:ENEI) plans to sell assets totaling about 21 billion euros to reduce debt and finance investments, according to the company’s new strategic plan.

In particular, Enel plans to sell its assets in Romania and withdraw from Peru and Argentina. It is expected that a significant part of these assets will be sold by the end of next year.

As a result, the company intends to focus on six key markets – Italy, Spain, the USA, Brazil, Chile and Colombia.

The key strategic focus will be on electrification, and by 2025 Enel expects to sell about 80% of its electricity under long-term fixed-price contracts. By that time, the company plans to increase its electricity generation capacity from renewable sources by about 21 gigawatts, after which renewable energy will account for about 75% of all electricity produced.

The company plans to invest about 37 billion euros between 2023 and 2025.

Enel Green Power Italy’s management has set medium-term targets for adjusted profit and adjusted EBITDA for 2025 at €7-7.2 billion and €22.2-22.8 billion, respectively. By comparison, the company expects to record adjusted profit of 5-5.3 billion euros and adjusted EBITDA of 19-19.6 billion euros in 2022.

The company expects to keep its dividend at 43 euro cents per share in 2023-25 versus 40 euro cents in 2022.

Since the beginning of the year, the price of Enel Italy stock decreased and its capitalization fell by 27.5% to 51.67 billion euros.

Earlier we reported that Uniper had agreed on an additional €25 billion in financial aid.

Forex

Analysis-As yuan skids, markets bet more depreciation is in store

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By Rae Wee and Vidya Ranganathan

SINGAPORE (Reuters) – is sliding and market participants suspect authorities are deliberately but slowly engineering a light depreciation of the currency, both to complement an easy monetary policy and to support exports.

Several signals have stirred that speculation. While the yuan has declined roughly 2% this year against the dollar, it has become relatively less competitive as Japan’s yen and currencies of other neighbours South Korea, Thailand and Taiwan drop more sharply.

The People’s Bank of China (PBOC) also appears to have loosened its grip on the yuan, allowing it to fall to the weak side of the 7.2-per-dollar level that state-owned banks had staunchly defended in the past, though it has continued to lend some support through stronger-than-expected settings of the daily mid-point for the currency.

Last Friday, traders took the absence of state banks in the market to push the yuan to 7.23 to a dollar initially, and even though state banks eventually stepped in the yuan saw its biggest daily drop in nearly 3 months.

Analysts at National Australia Bank (OTC:) (NAB) said it was “more than coincidental” that the PBOC’s defence of the yuan had relaxed in the same week the Bank of Japan abandoned its negative rates and yield-curve control policy.

Though the BOJ’s policy shift last week was momentous, Japanese yields are still barely positive and the yen has ironically weakened further. It is down 7% this year against the dollar this year alone, and at a 30-year low against the yuan.

“Concerns at loss of export competitiveness vis-à-vis Japan too have motivated Friday’s decision to lift the 7.20 cap,” NAB analysts Ray Attrill and Rodrigo Catril wrote this week.

The yuan’s trade-weighted index is up 2% so far this year as currencies of China’s trading partners have weakened, gnawing away at the country’s export competitiveness and hobbling its uneven economy recovery.

The index is at 99.30, far above the 92-98 band that analysts think the PBOC is comfortable with.

The PBOC did not respond to a Reuters request for comments.

FLOWS AND OTHER FORCES

Even though China’s exports seem to have rebounded early this year, the manufacturing sector is struggling, and weak export orders suggest the sector needs more support. A weak yuan would help lift export earnings.

Analysts at Oxford Economics expect the monetary policy divergence between the U.S. Federal Reserve and PBOC to keep the yuan weak in the first half of 2024, but wrote that “any depreciation ahead is likely to be highly controlled”, and projected the yuan will not fall beyond 7.34, a level last seen in September.

UBS strategists Rohit Arora and Teck Quan Koh also reckon there could be a shift in Beijing’s policy priorities, similar to the yuan’s decline in the second half of 2022, when it gradually fell nearly 9% to as far as 7.328.

“Put another way, we don’t expect authorities to allow yuan to be fully market-driven, but continue with a managed and orderly adjustment process,” they said.

Barring another big boost for the U.S. dollar, they expect the yuan will head slowly for 7.4.

Indeed, the steady outflows from frail mainland stock markets and other speculative bets might require the PBOC to dampen volatility, as it does normally through state banks.

One such pressure point is the yuan’s increasing use in ‘carry trades’ in which investors borrow in a currency with low interest rates and invest the proceeds in a higher-yielding currency.

Returns on yuan-funded carry trades are lower than that on yen-funded ones, where an easy 5% annualised gain can be made on 3-month swaps. But traders expect the yen to be more volatile under the BOJ’s new policy regime, while the yuan has traditionally been sheltered.

“From where I sit, the only thing preventing the yuan from meaningfully weakening is active policy guidance from PBOC,” said Rong Ren Goh, a portfolio manager in the fixed income team at Eastspring Investments.

© Reuters. A China yuan note is seen in this illustration photo May 31, 2017.     REUTERS/Thomas White/Illustration/File Photo

Goh has been using the as a funding currency since the beginning of the year, shorting the currency and investing in high-yielding assets such as Indian rupee bonds.

“If you’ve held a long dollar-CNH position since the beginning of the year, you would have already earned more than 400 pips of carry and capital gains,” Goh said.

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Forex

Japan’s yen hits 34-year low, sparking intervention warnings

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By Karen Brettell and Harry Robertson

NEW YORK/LONDON (Reuters) – The yen dropped to its lowest level since 1990 on Wednesday before rebounding slightly after Japan’s top monetary officials met to discuss the rapidly weakening currency and suggested they were ready to intervene.

The dollar briefly rose to 151.975 yen, its strongest against the yen since mid-1990, and was last down 0.19% at 151.29.

The Bank of Japan, the Finance Ministry and Japan’s Financial Services Agency held a meeting late in Tokyo trading hours, after which top currency diplomat Masato Kanda said he “won’t rule out any steps to respond to disorderly FX moves”.

Japanese authorities stepped in to defend the yen at 151.94 in 2022 and finance minister Shunichi Suzuki on Wednesday used the same words that preceded that intervention, warning Japan would take “decisive steps” against excessive currency moves.

“They are swimming against the current here, to an extent. Intervention helps in the near term, but it’s not a long term solution,” said Bipan Rai, North American head of fx strategy at CIBC Capital Markets in Toronto.

The yen has slumped more than 7% this year, driven by the widening gap between U.S. and Japanese bond yields, which the Bank of Japan’s small interest rate hike last week did little to change.

The U.S. Federal Reserve beginning an interest rate cutting cycle and a decline in government bond yields outside of Japan may now be key to stemming the drop in the Japanese currency.

“I suspect that intervention, or threats to conduct intervention, are really just a measure of buying time until we start to see things shift on a more sustained basis outside the country,” Rai said.

KING DOLLAR

The dollar is on course for solid quarterly gains after investors pared back their expectations for big interest rate cuts in the face of strong economic data and reticence from central bankers.

Guy Miller, chief market strategist at Zurich Insurance group, said that other currencies were suffering under the weight of a strong U.S. currency.

“The US economy has done much better than most had expected, particularly compared to other parts of the world,” Miller said.

The gained 0.11% at 104.40, and is up around 3% so far in 2024.

The market’s main focus this week is on U.S. core inflation figures due on Good Friday, though already a bigger-than-expected jump in U.S. durable goods orders on Tuesday boosted the dollar somewhat, weighing further on the yen.

The euro fell 0.15% to $1.0814. Sterling weakened 0.07% to $1.262.

The dollar strengthened against Sweden’s crown after the Swedish central bank held interest rates and hinted at rate cuts in the coming months. It was last up 0.33% at 10.62 crowns.

© Reuters. FILE PHOTO: Banknotes of Japanese yen and U.S. dollar are seen in this illustration picture taken September 23, 2022. REUTERS/Florence Lo/File Photo

The Swiss franc fell to its lowest since early November on Wednesday at 0.9071 to the dollar. The Swiss currency is still reeling from a surprise rate cut in Switzerland last week, and is down around 7% this year.

In cryptocurrencies, bitcoin fell 1.15% to $68,987.91.

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Japanese authorities confer on weak yen, hint at intervention option

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By Tetsushi Kajimoto

TOKYO (Reuters) – Japan’s three main monetary authorities held an emergency meeting on Wednesday to discuss the weak yen, and suggested they were ready to intervene in the market to stop what they described as disorderly and speculative moves in the currency.

In a sign of growing urgency to put a floor under the yen after the currency fell to a 34-year low against the dollar, the Bank of Japan, the Finance Ministry and Japan’s Financial Services Agency held a meeting late in Tokyo trading hours.

In a briefing afterwards, top currency diplomat Masato Kanda said he “won’t rule out any steps to respond to disorderly FX moves”. Kanda also said the BOJ would respond through monetary policy if currency moves affected the economy and price trends.

The dollar slipped against the yen on news of the meeting and was last at 151.06 after Kanda spoke. Earlier, the yen was at 151.97, weaker than the 151.94 level at which Japanese authorities stepped in during October 2022 to buy the currency.

The yen has continued to lose ground despite a historic shift away from negative interest rates by the BOJ last week.

A weaker yen makes exports from the world’s fourth-largest economy cheaper, but can push up prices of energy and other Japanese imports, fuelling inflation and making the cost of living higher. 

That undermines the BOJ’s objective of achieving a sustainable 2% inflation level via wage growth and better household purchasing power, rather than cost-push inflation.

Earlier in the day, Finance Minister Shunichi Suzuki said authorities could take “decisive steps” against yen weakness – language he hasn’t used since 2022 when Japan last intervened in the market. He made his remarks shortly after the dollar spiked on strong U.S. data.

“Now we are watching market moves with a high sense of urgency,” he told reporters.

Christopher Wong, a currency strategist at OCBC in Singapore, said markets were gingerly testing to see where’s the line for Tokyo. 

“I think that the risk of intervention is quite high, because this is a new cycle high,” he said, adding that if Tokyo doesn’t act, it would just encourage people to push the dollar/yen exchange rate a lot higher in the next few days.

DOMINO EFFECT

Bank of Japan Governor Kazuo Ueda said on Wednesday that the central bank would also keep a close eye on currency developments.

“Currency moves are among factors that have a big impact on the economy and prices,” Ueda told parliament, when asked about the yen’s recent sharp declines.

National Australia Bank (OTC:) forex strategists said ripples from the yen’s decline were being felt elsewhere and said that a recent sharp drop in may be a policy response to protect the competitiveness of Chinese exports.

“It’s not just a yen story. It has a domino effect that causes downside risk to other currencies,” said NAB strategist Rodrigo Catril.

While the BOJ raised interest rates for the first time since 2007 last week, markets now believe the next hike may be some time away.

© Reuters. Examples of Japanese yen banknotes are displayed at a factory of the National Printing Bureau producing Bank of Japan notes at a media event about a new series of banknotes scheduled to be introduced in 2024, in Tokyo, Japan, November 21, 2022. REUTERS/Kim Kyung-Hoon/File Photo

That has reinforced the yen’s use in carry trades, in which investors borrow in a currency with low interest rates and invest the proceeds in a higher-yielding currency. Japanese investors can also get much stronger returns abroad, depriving the yen of support from repatriation flows.

For the current quarter that ends later this week, the yen is the worst-performing major currency, down more than 7% on the dollar.

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