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Will Croatia join schengen? Croatia became a member of the Schengen Agreement on visas and introduced the euro on January 1

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is croatia part of the schengen agreement

Will Croatia join Schengen? On January 1, 2023, Croatia became the 20th member state of the European Union to join the Eurozone and the 27th member state of the Schengen Area.

By joining the European Union in 2013, Croatia pledged to meet the euro and Schengen criteria, which were implemented after several years of preparation, Anadolu Agency reported. Previously, the question of whether Croatia was part of the Schengen agreement was incredibly hot. But on the first of January, minutes after midnight, the manager of the Croatian National Bank (CNB) Boris Vujcic and Finance Minister Marko Primorac withdrew the first euros from an ATM near the bank to symbolically mark the country’s entry into the euro zone.EURODOLLAR futures also rose in the background.

On the morning of January 1 European Commission President Ursula von der Leyen and Croatian Prime Minister Andrej Plenkovic will go to the Bregana border crossing, where they will be met by Slovenian President Natasa Pirz Musar. Von der Leyen and Plenkovic will then have coffee in Ban Jelačić square and pay for it in euros to symbolically mark Croatia’s accession to the Schengen and eurozone.

Joining the eurozone and Schengen are two key foreign policy goals Croatia has had since joining NATO and the EU, while Croatia’s membership in the Organization for Economic Cooperation and Development (OECD) is often singled out as an unfulfilled goal. Croatia is already a heavily linked economy to the single European currency, with more than half of domestic savings and credit in euros and more than two-thirds of economic exchange and a similar number of tourists coming from the eurozone.

Replacing the kuna with the euro is a process that technically began with the introduction of dual pricing, which has become mandatory in almost all retail outlets, and which many retailers introduced even before the September 5 deadline. However, until January 14, Croatian citizens will still be able to pay in kunas, and refunds will be made in euros, only in exceptional cases in kunas.

Retail chains are expected to be among the main places to convert the remaining kuna into euros, and small retailers are making strenuous preparations for the exchange of kuna. A fixed conversion rate of 7.53450 kuna per euro has been set, according to which all savings in the accounts of citizens and business entities will be automatically converted into euros at all banks from January 1 at a fixed exchange rate.

Earlier we reported that the dollar exchange rate is currently trading in different directions against the euro and the yen.

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Yen likely set for more pain against dollar as wage data to keep BoJ policy loose

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The yen will likely continue to drag its heels against the dollar, MUFG says, as the latest economic Japanese data showing weaker wage growth is expected to keep the Bank of Japan leaning dovish at the policy meeting next week.

USD/JPY was up 0.1% to 139.66.

Without a shift in BoJ policy to a less dovish stance, the yen is “more likely to continue trading at weak levels,” MUFG said following weaker-than-expected wage data overnight Tuesday.

Real wages in Japan dropped 3.0% from a year earlier in April, the labor ministry reported Tuesday, steeper than the 2.0% economists had expected and will “reinforce market expectations for the BoJ to maintain current loose policy settings at this month’s policy meeting on 16th June and for the rest of this year,” MUFG added.

The weakness in April was driven by a “drop in overtime earnings, which fell for the first time in more than two years, and subdued bonus payments growth,” Daiwa Capital Markets said in a note.

The yen’s breach of 140 against the greenback on Monday stoked talk that the central bank could intervene to prop up the currency following a similar move last year when the yen topped 150 against the dollar.

But the latest data is a setback for the BoJ, MUFG says, as the central bank was expecting that the recent round of agreements by labor unions and employers to hike wages would have been reflected in the data.

“The BoJ has been expecting around 40% of the wage negotiation results to have been reflected in April with the number rising to more than 80% by July,” according to MUFG.

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Dollar adrift as traders assess Fed options; Aussie buoyant

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The dollar edged lower on Wednesday as traders assessed the odds of a rate hike by the Federal Reserve next week, while the Aussie scaled a fresh three-week high in the wake of a rate increase and a decidedly hawkish stance by its central bank .

The Australian dollar peaked at $0.6690 in early Asia trade, its highest since mid-May, buoyed by lingering effects of the Reserve Bank of Australia’s (RBA) quarter-point interest rate increase to an 11-year high on Tuesday.

The decision and the RBA’s hawkish policy statement had sent the Aussie rising 0.8% in the previous session, with governor Philip Lowe warning of more tightening on the cards because inflation was still too high.

“The cash rate is now 4.1%, which we think is in a deeply restrictive territory, so that obviously means that the risk of a hard landing in the Australian economy has increased,” said Carol Kong, a currency strategist at Commonwealth Bank of Australia (OTC:CMWAY).

In a speech on Wednesday, Lowe reiterated that some further tightening may still be required to bring inflation to heel, though that would depend on how the economy and inflation evolve.

In the broader currency market, the U.S. dollar dipped in early Asia trade, as traders pared back their expectations of a rate hike at next week’s FOMC meeting.

Against the greenback, sterling rose 0.08% to $1.2432, while the kiwi gained 0.08% to $0.6084.

Money markets are pricing in a roughly 19% chance that the U.S. central bank will raise rates by 25 basis points next week, compared to an over 60% chance a week ago, according to the CME FedWatch tool.

Data out last week showed that the U.S. services sector barely grew in May as new orders slowed, pushing a measure of prices paid by businesses for inputs to a three-year low, a welcome sign for the Fed in its fight against inflation.

“We don’t think the FOMC will hike next week … but risks again are skewed to the upside,” said Kong.

The U.S. dollar index slipped 0.03% to 104.05, while the euro rose 0.07% to $1.0698.

Euro zone consumers lowered their inflation expectations, a European Central Bank survey showed, a relief for policymakers after an unexpected surge a month earlier.

Against the Japanese yen, the greenback slipped 0.27% to 139.26.

Elsewhere, the Turkish lira slid nearly 2% to a fresh record low of 21.99 per U.S. dollar, while the Canadian dollar rose to a fresh one-month high of C$1.3388 to the greenback ahead of an interest rate decision later on Wednesday.

CRYPTO SHAKEOUT

In the cryptoverse, bitcoin, the world’s biggest cryptocurrency, was last marginally higher at $27,273, after jumping nearly 6% on Tuesday.

The U.S. Securities and Exchange Commission (SEC) on Tuesday sued Coinbase (NASDAQ:COIN), accusing the largest U.S. cryptocurrency platform of operating illegally because it failed to register as an exchange, a move which came just a day after the regulators sued Binance, the world’s largest cryptocurrency exchange, and its CEO Changpeng Zhao.

“Bitcoin is trading higher … on a flight to the quality end of crypto,” said Tony Sycamore, a market analyst at IG Markets.

Binance’s BNB token was up 0.45% at $283.13, having plunged 9.2% on Monday.

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Asia FX muted as Chinese, Australian economic data disappoints

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Most Asian currencies were muted on Wednesday as weaker-than-expected economic prints from China and Australia soured sentiment towards the region, while anticipation of an upcoming Federal Reserve meeting also weighed.

The Chinese yuan reversed early gains and traded flat after data showed the country’s trade surplus sank to a 13-month low in May, driven chiefly by a surprise tumble in exports. The reading showed that overseas demand for Chinese goods remained weak amid worsening economic conditions across the globe, presenting new headwinds for China as it struggles to recover from three years of COVID disruptions.

The Australian dollar was flat as the country’s economy barely grew in the first quarter, amid pressure from high interest rates and inflation.

But the Aussie took some support from comments by Reserve Bank Governor Philip Lowe, who reiterated that local interest rates may need to rise further in order to curb overheated inflation. The RBA had hiked interest rates again on Tuesday, bringing them above 4% for the first time in 12 years.

Most other Asian currencies moved little, given that the prospect of a weak Chinese economy bodes poorly for countries with high exposure to the Asian giant.

The Japanese yen was a clear outperformer for the day, rising 0.3% from near six-month lows as recent losses in the currency spurred speculation that the government could once again intervene in currency markets to support the yen.

A dovish outlook from the Bank of Japan greatly reduced the yen’s appeal in a high-yield environment, which had in turn spurred steady intervention through late-2022.

Weak inflation and wage growth readings for recent months spurred more bets that the BOJ will maintain its ultra-loose policy in the near-term.

The Indian rupee moved little ahead of a Reserve Bank meeting this week.

The dollar was flat in Asian trade after a muted overnight session, with the dollar index and dollar index futures moving less than 0.1% in either direction. While weak U.S. economic data spurred some losses in the dollar this week, it remained steady near 11-week highs as markets grew uncertain over a Federal Reserve meeting next week.

Fed Fund futures prices show markets are positioning for a nearly 82% chance the central bank will keep rates steady. But given that recent inflation and labor market data beat expectations, traders remained wary of a potential 25 basis point hike by the Fed.

Still, even if the Fed decides to pause its rate hike cycle, markets see little chances of a rate cut this year, with high interest rates set to weigh on most Asian currencies.

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