Forex
Janet Yellen in South Korea: “supporting friends” and reducing dependence on China and Russia
U.S. Treasury Secretary Janet Yellen said Monday in Seoul that the United States is going to prevent countries with “dictatorial policies,” such as China, from gaining dominance over certain resources and products and advocated stronger economic cooperation with South Korea.
During a visit to South Korea, U.S. Treasury Secretary Janet Yellen said the United States wants to end its unwarranted dependence on rare-earth metals, solar panels and other goods from China.
She explained that such a dependence would be dangerous if Beijing decided to stop supplying. She also noted that she is pushing for more trade ties with South Korea.
According to the minister, this would increase the sustainability of supply chains, and prevent possible manipulation by geopolitical rivals and security threats.
Janet Yellen said the U.S. is diversifying its supply chains so that it only relies on reliable partners. This will help combat inflation and China’s trade practices, which she called “unfair.
Yellen noted that South Korea has enormous advantages regarding resources, technology and capabilities, and that its companies are investing in the U.S. She also attributed an important role to semiconductor manufacturing.
The Minister recalled that earlier Beijing had stopped supplies to Japan and had tried to put pressure on Australia and Lithuania. The USA didn’t approve of such behavior.
At the same time, Janet Yellen admitted that China listened to the USA’s concerns in other areas.
She said that the United States had real concerns about China, but urged it not to create a picture of escalating hostilities with China.
U.S. Treasury Secretary Yellen threatened violators of the “world economic order
U.S. Treasury Secretary Janet Yellen said during a speech in Seoul that Russia is using economic integration “as a weapon” and threatened harsh consequences for those countries that violate the global economic order.
Yellen indicated that Washington was going to expand trade ties with South Korea and other reliable allies to improve supply security and avoid “possible manipulation by geopolitical rivals.” However, she did not specify which rivals she was referring to.
Before that, the U.S. threatened China with consequences because of possible circumvention of sanctions against Russia or provision of arms to it.
– We have publicly voiced the message that providing arms or any assistance from China to circumvent Russia’s unprecedented sanctions, export controls, or other financial measures imposed against Moscow would be very costly. Not just on the U.S. side, we are working with dozens of countries around the world,” said Ned Price, the head of the State Department press office.
South Korea is Ready to Participate in Measures to Restrict Russian Oil Prices
Chu Gen-ho, South Korea’s deputy prime minister for economics and part-time minister of strategy and finance, said in a meeting with U.S. Treasury Secretary Janet Yellen on Monday that the country is ready to join measures to curb the price of Russian oil, Renhap news agency reported.
Yellen is visiting Seoul on July 19-20. She also met with President Yoon Seok-El and is scheduled to meet with Bank of Korea Governor Lee Chang-Yong.
During her meeting with Chu Gen-ho, she reiterated the need for a price cap on Russian oil and asked South Korea to get involved.
“We are sympathetic to the goal of imposing (a restriction on the price of Russian oil – ed) and are ready to join it. The oil price restriction should be effectively designed to contribute to the stability of international oil prices and consumer prices,” Chu Gen Ho responded.
The head of the U.S. Treasury Department thanked the South Korean side for its understanding and looked forward to Seoul’s participation in developing a concrete cap system.
Also, the two sides agreed on the importance of strategic economic cooperation between South Korea and the United States in a difficult environment, including amid supply chain disruptions, soaring inflation and commodity prices due to the Ukraine crisis, and financial market volatility. Cooperation in clean energy, climate change, and health care was also discussed.
Investing.com – The US dollar rose in thin holiday-impacted trade Tuesday, retaining recent strength as traders prepared for fewer Federal Reserve rate cuts in 2025.
At 04:25 ET (09:25 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% higher to 107.905, near the recently hit two-year high.
Dollar remains in demand
The dollar has been in demand since the Federal Reserve outlined a hawkish outlook for its interest rates after its last policy meeting of the year last week, projecting just two 25 bp rate cuts in 2025.
In fact, markets are now pricing in just about 35 basis points of easing for 2025, which has in turn sent US Treasury yields surging, boosting the dollar.
The two-year Treasury yield last stood at 4.34%, while the benchmark 10-year yield steadied near a seven-month high at 4.59%.
“We think this hawkish re-tuning of the Fed’s communication will lay the foundation for sustained dollar strengthening into the new year,” said analysts at ING,in a note.
Trading volumes are likely to thin out as the year-end approaches, with this trading week shortened by the festive period.
Euro near to two-year low
In Europe, fell 0.1% to 1.0396, near a two-year low, with the set to cut interest rates more rapidly than its US rival as the eurozone struggles to record any growth.
The ECB lowered its key rate earlier this month for the fourth time this year, and President Christine Lagarde said earlier this week that the eurozone was getting “very close” to reaching the central bank’s medium-term inflation goal.
“If the incoming data continue to confirm our baseline, the direction of travel is clear and we expect to lower interest rates further,” Lagarde said in a speech in Vilnius.
Inflation in the eurozone was 2.3% last month and the ECB expects it to settle at its 2% target next year.
traded largely flat at 1.2531, with sterling showing signs of weakness after data showed that Britain’s economy failed to grow in the third quarter, and with Bank of England policymakers voting 6-3 to keep interest rates on hold last week, a more dovish split than expected.
Bank of Japan stance in focus
In Asia, fell 0.1% to 157.03, after rising as high as 158 yen in recent sessions, after the signaled that it will take its time to consider more interest rate hikes.
edged 0.1% higher to 7.3021, remaining close to a one-year high as the prospect of more fiscal spending and looser monetary conditions in the coming year weighed on the currency.
Beijing signaled that it will ramp up fiscal spending in 2025 to support slowing economic growth.
Investing.com– Most Asian currencies moved in a tight range on Tuesday, while the dollar extended overnight gains as traders positioned for a slower pace of interest rate cuts in the coming year.
Trading volumes were muted before the Christmas break, while most regional currencies were nursing steep losses against the greenback for the year.
Asian currencies weakened sharply last week after the Federal Reserve effectively halved its outlook for rate cuts in 2025, citing concerns over sticky U.S. inflation.
Dollar near 2-year high on hawkish rate outlook
The and both rose about 0.1% in Asian trade, extending overnight gains and coming back in sight of a two-year high hit last week.
While the greenback did see some weakness after data read lower than expected for November, this was largely offset by traders dialing back expectations for interest rate cuts in 2025.
The Fed signaled only two rate cuts in the coming year, less than prior forecasts of four.
Higher U.S. rates diminish the appeal of risk-driven Asian markets, limiting the amount of capital flowing into the region and pressuring regional markets.
Asia FX pressured by sticky US rate outlook
Most Asian currencies weakened in recent sessions on the prospect of slower rate cuts in the U.S., while uncertainty over local monetary policy and slowing economic growth also weighed.
The Japanese yen’s pair fell 0.1% on Tuesday after rising as high as 158 yen in recent sessions, after the Bank of Japan signaled that it will take its time to consider more interest rate hikes.
The Australian dollar’s pair fell 0.2% after the minutes of the Reserve Bank’s December meeting showed policymakers saw an eventual easing in monetary policy, citing some progress in bringing down inflation. But they still flagged potential upside risks for inflation.
The Chinese yuan’s pair rose 0.1% and remained close to a one-year high, as the prospect of more fiscal spending and looser monetary conditions in the coming year weighed on the currency.
Beijing signaled that it will ramp up fiscal spending in 2025 to support slowing economic growth.
The Singapore dollar’s pair rose 0.1%, while the Indian rupee’s pair rose 0.1% after hitting record highs above 85 rupees.
Investing.com — The dollar has surged past its post-2022 range, buoyed by U.S. economic exceptionalism, a widening interest rate gap, and elevated tariffs, setting the stage for further gains next year.
“Our base case is that the dollar will make some further headway next year as the US continues to outperform, the interest rate gap between the US and other G10 economies widens a little further, and the Trump administration brings in higher US tariffs,” Capital Economics said in a recent note.
The bullish outlook on the greenback comes in the wake of the dollar breaking above its post-2022 trading range, reflecting renewed confidence among investors driven by robust U.S. economic data and policy expectations.
A key risk to the upside call on the dollar is a potential economic rebound in the rest of the world, similar to what occurred in 2016, Capital Economics noted.
Following the 2016 U.S. election, economic activity in the rest of the world rebounded, while Trump’s tax cuts didn’t materialize until the end of 2017, and the Fed took a more dovish path than discounted, resulting in a 10% drop in the DXY on the year, which was its “worst calendar year performance in the past two decades,” it added.
While expectations for a recovery in Europe and Asia seem far off, a positive surprise for global growth “should be ruled out”, Capital Economics said.
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