Asia FX rises, dollar dips amid easing bank crisis fears

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2023-03-17 14:16:00

Come from : Investing.com

  • © Reuters.

    © Reuters.

By Ambar Warrick

Investing.com-- Most Asian currencies rose sharply on Friday amid easing fears of a global banking crisis, while the dollar retreated as markets also bet that the Federal Reserve will soften its hawkish stance to prevent more economic pain.

China’s yuan was among the best performers for the day, rising nearly 0.5% as a positive outlook on the Chinese economy from Goldman Sachs also boosted sentiment. The investment bank expects China’s economy to grow 6% this year, more than government forecasts of 5%.

Economic data released this week showed that certain facets of the economy were recovering from three years of COVID lockdowns. But growth in the manufacturing sector still remained below full capacity. 

The Japanese yen rose 0.6% and was set to add 1.4% this week, having benefited greatly from increased safe haven demand. A mild improvement in Japan’s massive trade deficit also helped sentiment towards the yen, amid easing supply chain issues.

Broader Asian currencies advanced amid increased risk appetite, as fears of an imminent banking collapse were eased by several major U.S. lenders supporting First Republic Bank (NYSE:FRC). This came after Swiss lender Credit Suisse Group AG (SIX:CSGN) scored an up to $54 billion credit facility from the Swiss National Bank to fortify liquidity levels.

The support for banks, coupled with government reassurances that the banking sector was stable, helped ease concerns over an imminent collapse in the banking system, following the failure of several U.S. banks over the past week.

The dollar index and dollar index futures retreated about 0.3% each amid bets that the Fed will taper its hawkish stance to prevent further pressure on the economy from rising interest rates.

The collapse of several U.S. banks in recent weeks was driven largely by a slump in bond prices, to which lenders such as Silicon Valley Bank were disproportionately exposed. 

Markets are now pricing in a nearly 90% chance that the Fed will hike rates by a smaller 25 basis points next week. 

Risk-heavy Southeast Asian currencies advanced on Friday, with the Thai baht rising 0.6%, while the Philippine peso added 0.5%.

The Singapore dollar rose 0.3% after data showed the island state’s key non-oil exports shrank slightly less than expected in February from the last year.

The Indian rupee rose 0.2%, also benefiting from weakness in oil markets, while the Australian dollar surged 0.8% after logging sharp losses over the past week. 

RECOMMENDED NEWS

Fed Liquidity Boost Is Bad for the Dollar, Deutsche Bank’s Ruskin Says

(Bloomberg) -- The rush to add liquidity into the monetary system is “the most overt sign” of financial stress and a clear negative for the dollar, according to Alan Ruskin, chief international strategist at Deutsche Bank AG (NYSE:DB).

“The Fed adding to its balance sheet but being slow to resolve the underlying financial problem, is among the worst outcomes for the USD,” Ruskin said after the Federal Reserve and five other central banks announced a coordinated effort Sunday to inject US dollar liquidity in an effort to ease growing strains in the global financial system.

“We are inclined to take a USD negative line, in so much as the SVB problem has triggered a crisis of confidence that has long-term structural ramifications for the US banking system,” he wrote in a note to clients.

The greenback extended its decline into a third day Monday as investors curtail bets on the Fed tightening its monetary policy this week in the aftermath of the Silicon Valley Bank collapse and the Credit Suisse Group AG bailout. 

Apart from the question of whether the Fed is about to pause its interest-rate hikes, the markets are also keenly attuned to what the Fed will say about its $8.6 trillion balance sheet. It was shrinking, but now started expanding again over the recent emergency lending programs. Fed Chair Jerome Powell and his colleagues are gathering Tuesday for a pivotal two-day policy meeting.

“A shock of this nature, that has deep-seated implications for a sector’s structure, is typically not responsive to immediate fixes,” Ruskin wrote about the SVB fallout. “The issues as they relate to banking sector structure, are also very specific to US, which is another reason why we draw USD negative conclusions.”

Bloomberg Dollar Spot Index fell 0.4% on Monday, shedding about 2% in value since the recent peak earlier in March. 

©2023 Bloomberg L.P.

 

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2023-03-21 01:45:00

Come from : Bloomberg

EU's EIB to break 4-year Turkey lending ban with earthquake aid

By Marc Jones

LONDON (Reuters) - The European Union's lending arm, the European Investment Bank, is to provide 500 million euros ($540 mln) for Turkey's post-earthquake rebuilding efforts, suspending an almost-total ban on financing for Turkey.

The EIB stopped virtually all lending in Turkey after a row over oil and gas drilling off Cyprus nearly four years ago.

But the severity of last month's quake, which killed nearly 56,000 people in Turkey and neighbouring Syria, has prompted it to make an exception.

"We are working together with the European Commission on a joint comprehensive package, of which up to 500 million euros is to be delivered by the EIB," the bank's vice president, Lilyana Pavlova, said in a statement.

"We will shortly present it to our Board of Directors for approval."

Speaking at an international donor conference, Commission President Ursula von der Leyen, said the overall package would add up to 1 billion euros ($1.1 bln).

While it is understood that all EU countries, including Cyprus, will give the green light for the EIB funding, formal approval might not come until June as the plans still need to be fleshed out and the timing is sensitive.

Turkey is set to hold pivotal presidential and parliamentary elections on May 14 and EU members are wary of a resumption of EIB lending being seen as an indirect backing of incumbent president Tayyip Erdogan's re-election campaign.

The EU has long accused Erdogan of human rights violations and the bloc's ties with Turkey are tense over Ankara's crackdown on dissent following a 2016 coup attempt as well as the oil and gas row in the Eastern Mediterranean.

More recently, Turkey has blocked a bid by Sweden - an EU member - to join NATO in the wake of Russia's war against Ukraine although it has just given Finland's membership its blessing.

The EIB lent around 2 billion euros a year in Turkey between 2009 and 2016 before the concerns about Ankara's domestic crackdown first saw the bank scale back its lending in the country.

($1 = 0.9328 euros)

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2023-03-21 00:56:00

Come from : Reuters

Safe haven status helps dollar edge higher; Fed meeting in focus

By Peter Nurse 

Investing.com - The U.S. dollar edged higher in early European trade Monday with the safe haven in demand amid the ongoing banking crisis and ahead of this week's Federal Reserve policy-setting meeting.

At 04:10 ET (08:10 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% higher at 103.470.

The dollar retreated overnight after a group of major central banks announced emergency liquidity measures in order to ensure the stability of the financial system.

This followed the emergency rescue of Credit Suisse (SIX:CSGN) with the Swiss authorities organizing the takeover of the banking giant by rival UBS (SIX:UBSG).

However, tensions in the banking sector remain, particularly in the debt market, given that UBS will write off about $17 billion worth of Credit Suisse bonds as part of the takeover.

Traders are also cautious ahead of this week's Federal Reserve meeting.

Expectations are now running high that the U.S. central bank will lift interest rates by only 25 basis points given the turmoil in the banking sector, a smaller hike than seemed likely earlier this month.

However, there remains a great deal of uncertainty over what signals the Fed will send to markets, given inflation remains elevated.

EUR/USD fell 0.1% to 1.0659, ahead of a speech by ECB President Christine Lagarde later in the session as she appears before the European Parliament's economic committee.

The European Central Bank increased interest rates by 50 basis points last week, with Governing Council member François Villeroy de Galhau saying Monday that the decision shows the institution is confident in the region's banks.

GBP/USD rose 0.2% to 1.2193, with the Bank of England expected to hike interest rates later this week. However, the central bank will have to strike a difficult balance between the fight against inflation and worries about financial turmoil.

AUD/USD traded flat at 0.6694, NZD/USD edged lower to 0.6257, while USD/JPY fell 0.5% to 131.12, with the yen also benefiting from its safe haven status.

Minutes from the Bank of Japan's March meeting showed that many board members were in favor of maintaining the central bank's extra accommodative stance, but some members voiced concern over lingering distortions in the yield curve that its policy has caused.

USD/CNY edged higher to 6.8891 after the People's Bank of China unexpectedly cut reserve requirement ratios for local lenders, loosening liquidity conditions.

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2023-03-20 16:30:00

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Asia FX sinks, dollar rises amid Fed uncertainty, bank crisis fears

By Ambar Warrick

Investing.com -- Most Asian currencies fell on Monday and the dollar rose as markets hunkered down ahead of a Federal Reserve meeting this week, while fears of a banking crisis kept sentiment on edge despite government measures to assuage market concerns.

The Chinese yuan fell 0.2% after the People’s Bank unexpectedly cut reserve requirement ratios for local lenders, loosening liquidity conditions. The central bank also maintained its loan prime rates at record lows, as it moves to increase liquidity conditions and shore up economic growth.

But this has the added effect of applying more pressure on the yuan, as the gap between local and overseas interest rates widens. The Chinese currency was trading close to the 7 level against the dollar on Monday.

Other Asian currencies also retreated, with the South Korean won losing 0.3%, while the Japanese yen lost about 0.1%. But the yen was trading close to its strongest level in a month, aided by increased safe haven demand in the past week.

Japan's Chief Cabinet Secretary Hirokazu Matsuno reassured investors on Monday that the country's banking system was stable and faced no contagion from the U.S. and European crises.

The dollar advanced slightly on Monday, with the dollar index and dollar index futures up 0.1% each.

But the markets were cautious over the greenback ahead of a Federal Reserve meeting this week, where the bank is expected to hike rates by 25 basis points.

Recent ructions in the banking sector saw markets betting that the Fed will soften its hawkish rhetoric to prevent further economic pressure from high interest rates.

The central bank, along with other major peers rolled out emergency liquidity measures over the weekend to support the banking sector and prevent further collapses. Regulators also brokered a merger of Swiss banks UBS Group (SIX:UBSG) and Credit Suisse Group (SIX:CSGN), as the latter grappled with a looming liquidity crisis.

But markets still remained on edge over more pain from the banking sector, after the unexpected collapse of several U.S. lenders last week. Traders were also uncertain over what signals the Fed will send to markets, given that its recent liquidity measures undermine a year-long struggle to tighten monetary conditions and fight inflation.

Volatility in the debt market also loomed, given that UBS will write off about $17 billion worth of Credit Suisse bonds as part of the takeover.

#FOREX

2023-03-20 14:04:00

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Yen eyes more gains as Fed balance sheet expands, bank turmoil brings dollar pain

By Yasin Ebrahim

Investing.com -- The turmoil in banking this week coaxed investors into the arms of the safe-haven yen at the expense of the dollar and many are calling for more of the same as the rewidening of the Fed’s balance sheet and the upcoming Federal Reserve decision points to more pain ahead for the dollar.

“We are maintaining a short USD/JPY trade idea,” MUFG said, targeting 129.00.

The yen, which racked up a 3% gain against the dollar this week, has been “one of the main beneficiaries so far from the loss of confidence in the health of the banking system,” MUFG added.

The concerns of a banking crisis -- brought on by the collapse of Silicon Valley Bank and Signature Bank -- over the past week triggered a rush to safe havens including gold, Treasuries and the yen as concerns about a contagion in the banking sector heated up.

The 2-year U.S. Treasury yield this week suffered its biggest three-day slump since Black Monday in October 1987 as investors piled into bonds and at the same repriced the Fed’s rate-hike path with cuts now forecast for the second half of the year.

The Fed, however, launched a new bank funding facility, allowing banks to receive loans up to one-year using qualifying assets including any underwater, or below par, bonds as collateral.

The lending facility will re-build bonds on the Fed’s balance sheet.

The move has not only blunted the Fed’s ongoing quantitative tightening program -- in which $95 billion of maturing bonds per month are allowed to mature – but triggered a rewidening of its balance sheet, likely keeping the pressure on the dollar.

“The rewidening of the Fed’s balance sheet and increase of USD liquidity are negative factors that are encouraging USD selling in the near-term,” MUFG said. The Fed’s balance sheet jumped by about $300B in the week to 15th March.

Much of the swelling of the Fed’s balance sheet was driven by a record $153B increase in borrowing from the Fed’s discount window, according to MUFG. But others expect it’s only a matter of time until an uptick in the Fed’s new lending program speeds up.

“The terms on this facility are so good that a significant take-up is quite probable,” ING said, adding that “once volumes build, more and more (mostly smaller) banks will likely use the facility.”

The Fed’s rate decision next week, meanwhile, isn’t likely to stop the rot in the dollar as many expect the turmoil in banking, which has already tightened financial conditions, may sway the Fed away from maintaining its hawkish tilt.

“Higher borrowing costs and reduced access to credit mean a higher chance of a hard landing for the economy. Rate cuts, which we have long predicted, are likely to be the key theme for the second half of 2023,” ING said.

“Our overall preference is to remain defensive this month and maintain overweight positions in the Japanese yen,” it added.

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2023-03-18 05:58:00

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Dollar retreats as banking support prompts relief rally

By Peter Nurse

Investing.com - The U.S. dollar slipped lower in early European trade Friday and riskier currencies rallied on easing concerns about a global banking crisis.

At 04:25 ET (08:25 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.4% lower at 103.715.

The foreign exchange market has seen a relief rally after a number of large U.S. banks injected $30 billion in deposits into First Republic Bank (NYSE:FRC), supporting this regional bank which had been caught up in the backwash of the collapse of two other smaller U.S. banks over the past week.

The move followed Credit Suisse's (SIX:CSGN) announcement earlier on Thursday that it would borrow up to $54B from the Swiss National Bank, ensuring the embattled lender had sufficient liquidity to cope with hefty withdrawals in the wake of a number of banking scandals.

EUR/USD rose 0.5% to 1.0659, benefiting from the decision of the European Central Bank to go ahead on Thursday with its previously signaled 50-basis-point rate hike amidst the banking turmoil.

This suggested the ECB policy makers remain confident in the underlying strength of the Eurozone banking sector.

At her regular press conference, President Christine Lagarde trod a fine line between acting tough on inflation and acknowledging the need for caution amid growing signs of financial stability risks.

The final CPI data for the Eurozone is due later in the session, and is expected to show that inflation grew 0.8% on the month in February, up 8.5% on the year.

GBP/USD rose 0.5% to 1.2166, AUD/USD soared 0.8% to 0.6708, NZD/USD gained 0.8% to 0.6246, while USD/JPY fell 0.3% to 133.32.

Japan's government is closely coordinating with the Bank of Japan and financial authorities overseas to prevent fallout from the banking difficulties of a number of Western banks, Finance Minister Shunichi Suzuki said on Friday.

U.S. economic data will center around the release of the University of Michigan’s consumer sentiment reading for March later in the session, which will provide a clue as to how Americans are coping with the current economic difficulties.

That said, most eyes have now moved on to next week’s Federal Reserve monetary policy meeting, with expectations rising that the U.S. central bank could slow its aggressive rate-hike campaign in a bid to ease the stress on the financial sector.

Markets are now pricing in a nearly 90% chance that the Fed will hike rates by a smaller 25 basis points next week.

#FOREX

2023-03-17 16:34:00

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Asia FX rises, dollar dips amid easing bank crisis fears

By Ambar Warrick

Investing.com-- Most Asian currencies rose sharply on Friday amid easing fears of a global banking crisis, while the dollar retreated as markets also bet that the Federal Reserve will soften its hawkish stance to prevent more economic pain.

China’s yuan was among the best performers for the day, rising nearly 0.5% as a positive outlook on the Chinese economy from Goldman Sachs also boosted sentiment. The investment bank expects China’s economy to grow 6% this year, more than government forecasts of 5%.

Economic data released this week showed that certain facets of the economy were recovering from three years of COVID lockdowns. But growth in the manufacturing sector still remained below full capacity. 

The Japanese yen rose 0.6% and was set to add 1.4% this week, having benefited greatly from increased safe haven demand. A mild improvement in Japan’s massive trade deficit also helped sentiment towards the yen, amid easing supply chain issues.

Broader Asian currencies advanced amid increased risk appetite, as fears of an imminent banking collapse were eased by several major U.S. lenders supporting First Republic Bank (NYSE:FRC). This came after Swiss lender Credit Suisse Group AG (SIX:CSGN) scored an up to $54 billion credit facility from the Swiss National Bank to fortify liquidity levels.

The support for banks, coupled with government reassurances that the banking sector was stable, helped ease concerns over an imminent collapse in the banking system, following the failure of several U.S. banks over the past week.

The dollar index and dollar index futures retreated about 0.3% each amid bets that the Fed will taper its hawkish stance to prevent further pressure on the economy from rising interest rates.

The collapse of several U.S. banks in recent weeks was driven largely by a slump in bond prices, to which lenders such as Silicon Valley Bank were disproportionately exposed. 

Markets are now pricing in a nearly 90% chance that the Fed will hike rates by a smaller 25 basis points next week. 

Risk-heavy Southeast Asian currencies advanced on Friday, with the Thai baht rising 0.6%, while the Philippine peso added 0.5%.

The Singapore dollar rose 0.3% after data showed the island state’s key non-oil exports shrank slightly less than expected in February from the last year.

The Indian rupee rose 0.2%, also benefiting from weakness in oil markets, while the Australian dollar surged 0.8% after logging sharp losses over the past week. 

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2023-03-17 14:16:00

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Dollar slips as banks rescue makes room for relief rally

By Rae Wee

SINGAPORE (Reuters) - The dollar slipped on Friday as risk sentiment improved after authorities and banks moved to ease stress on the financial system in major markets, taking heat off other major currencies that tumbled earlier in the week in the wake of bank turmoil.

Large U.S. banks on Thursday injected $30 billion in deposits into First Republic Bank (NYSE:FRC), swooping in to rescue the lender, which was caught up in a widening crisis triggered by the collapse of two other mid-size U.S. banks over the past week.

Cautious calm spread across markets on Friday, giving room for rises in risk-sensitive currencies like the Australian and New Zealand dollars, which were among the largest gainers in Asia trade.

The Aussie rose 0.4% to $0.6684, while the kiwi edged 0.3% higher to $0.62145.

The $30 billion rescue package, put together by top power brokers from the U.S. Treasury, Federal Reserve and banks, followed Credit Suisse's announcement earlier on Thursday that it would borrow up to $54 billion from the Swiss National Bank.

It had similarly become embroiled in widespread contagion following the implosion of U.S.-based Silicon Valley Bank (SVB).

But even as a 30% plunge in the embattled Swiss lender's shares stoked fears about the health of Europe's banks, the European Central Bank (ECB) nonetheless went ahead with a hefty 50-basis-point rate hike at its policy meeting on Thursday.

ECB policymakers sought to reassure investors that euro zone banks were resilient and that if anything, the move to higher rates should bolster their margins.

The euro's reaction to the decision was fairly muted, though it managed to eke out a 0.3% gain on Thursday. It was last 0.14% higher at $1.0625.

"The euro zone banking sector remains in reasonably solid shape," said Wells Fargo (NYSE:WFC) international economist Nick Bennenbroek.

"Should market strains ease and volatility recede in the weeks and months ahead, persistent inflation should in our view be enough to elicit further (ECB) tightening."

Elsewhere, sterling rose 0.15% to $1.2128, while the Swiss franc gained 0.1%. Earlier in the week, the Swissie had plunged the most against the dollar in a day since 2015.

The Japanese yen remained elevated, and was last roughly 0.3% higher at 133.30 per dollar.

Fragile market sentiment had traders flocking to the yen - typically considered a safer bet in times of turmoil - on mounting worries that the recent stress unfolding across banks in the U.S. and Europe could be just an early stage of a widespread systemic crisis.

"The market gyrations of the past week are not rooted in a banking crisis, in our view, but rather are evidence of financial cracks resulting from the fastest interest rate hike campaigns since the early 1980s," said analysts at BlackRock (NYSE:BLK) Investment Institute.

"Markets have woken up to the damage caused by that approach - a recession foretold - and are starting to price it in."

The Federal Reserve's monetary policy meeting next week now moves to centre stage. Some investors are hoping that the Fed could slow down on its aggressive rate-hike campaign in a bid to ease the stress on the financial sector.

"The turmoil in the banking sector is complicating the outlook for Fed policy, but the impact may be more nuanced than the Fed simply reversing course," said Philip Marey, senior U.S. strategist at Rabobank.

The U.S. dollar index slipped 0.12% to 104.27.

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2023-03-17 10:00:00

Come from : Reuters

Nigeria tops list of countries withholding airline funds, IATA says

LAGOS (Reuters) - Nigeria is withholding $743 million in revenue earned by international carriers operating in the country, the highest amount owed by any nation, a spokesperson for the global airlines industry association said on Thursday.

Nigeria faces severe shortages of foreign currency, leading to restrictions on imports and meaning investors cannot convert local currency to repatriate their profits.

International Air Transport Association (IATA) spokesperson Katherine Kaczynska said governments around the world owed $2.2 billion to airlines. Nigeria had the highest amount of blocked funds, followed by Algeria and Lebanon, which owed $165 million and $146 million respectively.

"Enabling the efficient repatriation of revenues is critical for any economy to remain globally connected to markets and supply chains," Kaczynska said in emailed response to questions from Reuters.

Dubai's Emirates suspended flights to Nigeria last year after failing to repatriate ticket sales. Last month, President Muhammadu Buhari directed the central bank to increase the amount of foreign currency allocated to Emirates after speaking to UAE President Sheikh Mohamed bin Zayed Al Nahyan.

Emirates has yet to resume flights to Nigeria, which is Africa's most populous nation and is responsible for a large share of the continent's air travellers.

Industrial-scale theft of crude of oil, Nigeria's single biggest earner of foreign exchange, has greatly reduced the country's flow of dollars in the last year.

Apart from Nigeria's $743 million debt, Kaczynska said countries under the West African Economic and Monetary Union owed $132 million while Zimbabwe, which has perennial dollar shortages owed $80 million.

#FOREX

2023-03-17 02:11:00

Come from : Reuters

Dollar retreats, euro gains after Credit Suisse boosts risk sentiment

By Peter Nurse

Investing.com - The U.S. dollar retreated in early European trade Thursday and the euro pushed higher as Credit Suisse’s move to bolster its financial position boosted risk sentiment.

At 03:55 ET (07:55 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.3% lower at 103.980, handing back some of the previous session’s 1% gain.

Credit Suisse (SIX:CSGN) announced late Wednesday plans to borrow as much as CHF 50 billion ($1 = CHF 0.9297) from the Swiss National Bank, strengthening its liquidity position.

Worries have been growing about the Swiss lender’s financial health for some time as it struggled with hefty customer outflows in the wake of a string of scandals. These came to head on Wednesday with its share price slumping to a record low as its main investor, Saudi National Bank, said it was unable to provide more funding to the lender.

The news of this credit line has boosted sentiment, soothing some concerns over an immediate collapse in the sector that had been hit hard by the three recent U.S. bank failures.

EUR/USD rose 0.4% to 1.0619, bouncing on the news, ahead of the European Central Bank’s latest policy-setting meeting later in the session.

The ECB had previously signaled the likelihood of another interest rate increase of 50 basis points as underlying Eurozone remained elevated, but concerns about potential repercussions to the banking sector from such a hefty hike could prompt the policy makers to act more cautiously.

“The market will … take its cue from the European Central Bank today. Pushing on with a 50bp rate hike will prove difficult and we should expect more volatility immediately after the … decision,” said analysts at ING, in a note.

ECB President Christine Lagarde’s press conference will also be of interest as she is sure to be asked how the central bank can balance efforts to deliver price stability while safeguarding financial stability.  

The question is the same in the U.S., with the Federal Reserve likely to hold back from increasing interest rates by an outsized 50 basis points next week, given the strain on the U.S. banking system.

Goldman Sachs has lifted its estimate of the odds of a U.S. recession to 35% over the next 12 months in response to increased uncertainty over the economic impact of bank stress, an increase from 25% previously.

Elsewhere, GBP/USD rose 0.3% to 1.2105, boosted by the improved risk sentiment. Also helping was Chancellor Jeremy Hunt's comments in the budget on Wednesday that the economy was likely to shrink 0.2% in 2023, an improvement from the previous forecast for a 1.4% contraction. 

USD/JPY fell 0.5% to 132.69, with the yen one of the best performers of the day. The risk-sensitive AUD/USD rose 0.6% to 0.665670, while USD/CNY edged 0.1% lower to 6.9007.

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2023-03-16 16:31:00

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Asia FX rattled by bank crisis fears, safe havens advance

By Ambar Warrick 

Investing.com -- Most Asian currencies kept to a tight range on Thursday amid renewed concerns over a U.S. and European banking crisis, with investors largely pivoting into safe haven currencies amid fears of broader economic headwinds. 

The Japanese yen was among the best performers for the day, rising 0.5% and sticking close to its strongest level in a month, while the Thai baht, which is generally seen as a safer investment among risk-heavy Southeast Asian currencies, advanced 0.4%. 

The Chinese yuan was flat after Goldman Sachs) hiked its outlook for Chinese economic growth in 2023 to 6% from 5.5%. The forecast, which is more than the 5% posited by the Chinese government, helped spur some optimism over a Chinese economic recovery, as the country reemerges from three years of COVID lockdowns. 

Still, weak risk appetite saw the yuan creep back toward the key 7 level against the dollar. 

Fears of a potential banking crisis came back to the fore on Wednesday following a rout in the shares of beleaguered Swiss lender Credit Suisse Group AG (SIX:CSGN). But the lender secured a $54 billion credit line from the Swiss National Bank, soothing some concerns over an immediate collapse in the banking sector. 

But this offered little relief to Asian currencies, as investors pivoted out of risk-heavy assets. Most regional currencies were muted on Thursday, while the Malaysian ringgit led losses in the region with a 0.6% tumble.

The dollar fell slightly against a basket of currencies, but was sitting on strong overnight gains. The dollar index and dollar index futures both fell 0.1% after rallying 1% in overnight trade. 

The greenback was largely buoyed by safe haven demand, and also saw bids amid increased uncertainty over the path of U.S. monetary policy. Focus is now squarely on a Federal Reserve meeting next week, where the bank is expected to hike interest rates by 25 basis points.

But fears of a brewing bank crisis, after the collapse of three regional U.S. banks, saw traders question whether the Fed will have enough economic headroom to keep raising rates. This caused sharp losses in the dollar earlier this week, offering some relief to Asian currencies. 

Focus was also on an upcoming interest rate decision by the European Central Bank, which is expected to raise rates by 50 basis points later in the day. The euro rose 0.3% in Asian trade.

The Australian dollar was among the few outliers for the day, rising 0.4% as stronger-than-expected employment data pushed up expectations of more interest rate hikes by the Reserve Bank.

#FOREX

2023-03-16 13:56:00

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Dollar up as market reassesses Fed rate path outlook; retail sales eyed

By Geoffrey Smith 

Investing.com -- The dollar was up in early trading as the market adjusted its view of the likely path for U.S. interest rates again in the wake of February's inflation report on Tuesday. 

The U.S. consumer price index had fallen to 6.0%, but core elements of the report continued to show prices rising at an uncomfortably fast rate, illustrating the Federal Reserve's lack of room for maneuver to respond to last week's banking failures. 

Rate-sensitive two-year bond yields had retraced around two-thirds of their Monday drop in response, as the market settled once again into a consensus that the Fed will raise interest rates by 25 basis points at its meeting next week, not least because failing to do so would likely be interpreted as panicking and as such, unlikely to restore confidence in the U.S. banking sector.

By 04:00 ET (08:00 GMT), the dollar index, which measures the greenback against a basket of advanced economy currencies, was up 0.1 at 103.30, having dropped as low as 103.00 during a four-day plunge.

The CPI report is set to be followed at 08:30 ET Wednesday by data on U.S. retail sales and producer price inflation for February, which will also be influential inputs for the Fed's decision next week.

In Europe, the euro is outperforming after Reuters reported that the European Central Bank is set to stick with its plans to raise its key rates by 50 basis points when it meets on Thursday, with its sources saying that a new set of staff forecasts will still show inflation above its 2% target in 2025.

That point was underlined by the publication of French inflation data for February, which were revised up to show a rise of 1.1% in prices last month, taking the annual rate of inflation in the Eurozone's second-largest economy back up to 7.3%

The euro rose as high as $1.0760, its highest since mid-February, before retracing to be at $1.0735, up 0.1% from late Tuesday. 

Elsewhere in Europe, sterling came under pressure again ahead of the U.K. government's new budget, which is expected to focus on measures to improve labor supply. The U.K. has the highest level of economic inactivity among G7 countries, due largely to long-term absenteeism and a rise in early retirement during the pandemic.

Elsewhere, the offshore yuan edged down after a mixed set of data for industrial production, retail sales and fixed asset investment in February. 

#FOREX

2023-03-15 16:26:00

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Asia FX muted, dollar flat amid mixed U.S., Chinese economic cues

By Ambar Warrick

Investing.com -- Most Asian currencies traded in a flat-to-low range on Wednesday as data showed a somewhat mixed recovery in the Chinese economy, while the dollar stuck to a near one-month low after consumer inflation eased as expected.

The Chinese yuan fell 0.2% after data showed industrial production grew less than expected in February, as the manufacturing sector struggled to recover from COVID-era lows.

But retail sales surged as expected, while higher-than-expected fixed asset investment showed that certain facets of the economy were recovering after the lifting of anti-COVID measures earlier this year.

Still, weakness in the manufacturing sector, which usually acts as a bellwether for China’s economy, showed that a bigger recovery was still a long way off. A recovery in China bodes well for the broader Asian economy, given the country's position as a dominant trading partner for the region.

Broader Asian currencies were muted as data released overnight provided mixed cues on the U.S. economy. The Japanese yen fell 0.2% against the dollar, while the Philippine peso added 0.3%, leading gains across Southeast Asia.

U.S. consumer price index inflation (CPI) eased as expected in February. But stickier-than-expected core CPI inflation showed that price pressures still remained relatively elevated, which could put more pressure on the Federal Reserve to tighten monetary policy.

Markets are betting that the Fed will have limited economic headroom to raise rates, given the increased pressure on the banking sector. The U.S. government intervened in the sector after the collapse of several regional banks last week.

The dollar index and dollar index futures traded sideways on Wednesday, and were nursing steep losses over the past few sessions.

U.S. producer price inflation and retail sales data is due later in the day, and is expected to provide more cues on the economy ahead of a Fed meeting next week. The central bank is expected to raise rates by 25 basis points.

The Indian rupee fell 0.2% after data released on Tuesday showed that wholesale inflation in the country grew much less than expected in February. The reading, coupled with earlier data that showed an easing in consumer inflation, drove up bets that the Reserve Bank will eventually hold on future interest rate hikes.

The South Korean won rose 0.1% as data showed the country's massive trade deficit narrowed slightly in February.

#FOREX

2023-03-15 13:45:00

Come from : Investing.com

Crypto exchange Binance to halt sterling transfers

By Elizabeth Howcroft and Tom Wilson

LONDON (Reuters) -Binance is halting its sterling deposits and withdrawals, a company spokesperson said on Tuesday, a month after the crypto exchange ceased dollar transfers.

Binance has been informed by its partner for sterling transfers, Paysafe, that it would halt its services from May 22, the spokesperson said, impacting all Binance customers.

Sterling transfers for new users were stopped on Monday, it said.

"Binance will ensure that affected users are still able to access their GBP balances," the spokesperson said, adding that the change "affects less than 1% of Binance users".

Binance, the world's largest crypto platforms with more than 128 million customers, did not give detail on the number of clients the move would impact.

Paysafe did not immediately respond to a request for comment from Reuters. The company offers the service via UK payments network Faster Payments, which also had no immediate comment.

The cessation of sterling transfers, first reported by crypto news outlet The Block, comes after Binance last month suspended all dollar bank transfers amid a growing crackdown on crypto by U.S. authorities.

A spokesperson for Skrill, the Paysafe unit that works with Binance, told crypto website Decrypt that "the UK regulatory environment in relation to crypto is too challenging to offer this service at this time and so this is a prudent decision on our part taken in an abundance of caution."

Britain's financial watchdog said last year that it lacked powers to stop Binance from accessing the Faster Payments network via PaySafe.

The UK's Financial Conduct Authority warned consumers in June 2021 that Binance did no hold "any form" of permission to offer services regulated by Britain.

#FOREX

2023-03-14 19:00:00

Come from : Reuters

Dollar stabilizes as shock from banking crisis recedes

By Geoffrey Smith 

Investing.com -- The dollar stabilized and the euro weakened in early trading on Tuesday in Europe, as the shock from the collapse of three U.S. banks in a week began to recede.

The signs of stress in the U.S. financial system have caused a sharp reappraisal of the outlook for interest rates across the U.S. and Europe since Thursday, with two-year yields in the U.S. falling by the most in any three days since the 1987 market crash. Whereas there was a broad consensus for a 25 basis point rate hike from the Federal Reserve next week, with 50 basis points seen as the next most likely outcome, most of the market now expects no change. Analysts at Nomura went as far as to predict the Fed will cut the target range for fed funds by 25 basis points.

Nomura's view remains a minority one, not least because U.S. inflation is still running well above target. The U.S. consumer inflation report for February is due at 8:30 ET (12:30 GMT) and is expected to show only a relatively modest drop to 6.0% from 6.4% in January. The monthly price dynamic is expected to weaken slightly to 0.4% from 0.5% in January. 

By 04:00 ET (08:00 GMT), the dollar index, which tracks the greenback against a basket of advanced economy currencies, was up 0.3% at 103.52. The dollar's gains came largely against the euro, which has outperformed since Thursday simply because the European Central Bank has all but committed itself to a hike of 50 basis points at its policy meeting on Thursday. That means that the key variable at the ECB meeting will be President Christine Lagarde's guidance for future meetings, which many now expect to be less hawkish than her most recent public comments. 

In her recent appearances, Lagarde has appeared to side more with hawks pushing for more 50 basis point steps later in the year. This now seems less likely, according to Berenberg Bank Chief Economist Holger Schmieding, not least because events in the banking system will cause financial conditions to tighten both in the U.S. and the Eurozone. 

"If the markets do more, the ECB has to do less," Schmieding said in a note to clients. 

The euro was down 0.3% at $1.0692, giving up some of the 2% rally over the last three days. The pound also weakened slightly after gaining nearly 3% against the dollar over the last week. By 04:00 ET, it was down 0.3% at $1.2148.

Sterling was still supported by labor market data showing a bigger-than-expected increase in employment in the three months through January that kept the jobless rate at a historically low level of 3.7%. Growth in average earnings weakened from the record levels it has posted in the previous two months. 

The Bank of England's next policy meeting is next week, a day after the Fed's. However, the pound has some event risk this week, with the government's new budget for the coming year due to be presented to parliament on Wednesday.

#FOREX

2023-03-14 16:35:00

Come from : Investing.com

Asia FX sinks as U.S. bank rout batters sentiment ahead of CPI data

By Ambar Warrick

Investing.com -- Asian currencies retreated on Tuesday as concerns over a banking crisis in the U.S. battered sentiment, with a mild recovery in the dollar also pressuring markets ahead of key inflation data due later in the day.

China’s yuan sank 0.4%, while the Japanese yen lost 0.5% as most regional currencies came under pressure from uncertainty over how U.S. monetary policy will proceed in the face of a potential banking crash.

Asian currencies had initially benefited from expectations that the Federal Reserve will curb its pace of interest rate hikes to stem further damage to the economy from high interest rates, which factored heavily in the collapse of Silicon Valley Bank (NASDAQ:SIVB).

But markets turned uncertain over such a notion ahead of consumer price index data due later in the day, which is expected to show U.S. inflation remained sticky in February. Any signs of stubborn inflation give the Fed more impetus to raise interest rates.

The dollar had plummeted against a basket of currencies after the government intervened in the banking sector. But the greenback recouped some losses on Tuesday, with the dollar index and US Dollar Index Futures rising 0.3% each.

Still, Fed Fund futures prices show that markets have abandoned expectations that the Fed will hike interest rates by 50 basis points next week, with a majority of traders pricing in a 25 bps hike.

Some analysts, including those at Goldman Sachs and Nomura also raised the possibility of no rate hike action by the Fed, due to market sentiment remaining fragile in the wake of the SVB collapse.

Broader Asian currencies retreated amid uncertainty over the Fed. The South Korean won sank 0.8%, while the Taiwan dollar lost 0.4%.

The Australian dollar fell 0.2% after a private survey showed that consumer sentiment remained near pandemic-era lows in March. A separate survey also showed that business sentiment worsened amid high inflation and rising interest rates.

Losses in the Indian rupee were somewhat limited on Tuesday, with currency trading down 0.1%. The rupee was supported by a sharp drop in oil prices, given that high oil imports account for a bulk of India’s current account deficit.

Data on Monday showed that Indian CPI inflation eased less than expected in February, with a similar trend expected from wholesale inflation due later in the day.

#FOREX

2023-03-14 14:02:00

Come from : Investing.com

Dollar weakens as banking turmoil could stay Fed's hand

By Peter Nurse

Investing.com - The U.S. dollar slipped lower in early European trade Monday as traders reassessed the likelihood of another rate hike by the Federal Reserve later this month given the ongoing U.S. banking crisis.

At 03:10 ET (08:10 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.6% lower at 103.528, trading near a one-month low.

The U.S. authorities decided to step in over the weekend and cover all depositors at Silicon Valley Bank, which had to cease trading last week, as well as depositors at SignatureBank, which was wrapped up over the weekend.

Both the U.S. Treasury and Federal Reserve were keen to make sure the second- and third-largest failures in U.S. banking history wouldn’t have wider repercussions, announcing emergency funding measures for the sector.

The news also raised expectations that the Fed would hold back from increasing interest rates by an outsized 50 basis points next week, given the strain on the U.S. banking system.

Influential investment bank Goldman Sachs said on Sunday that they no longer expect the U.S. central bank to deliver a rate hike at its meeting on March 22, having previously predicted a 25-basis-point increase.

“Pressure on the U.S. banking system is questioning whether the Fed can push ahead with such an aggressive tightening cycle,” said analysts at ING, in a note. “One would normally think that a sell-off in equities is dollar bullish, perhaps not, however, if the epicentre for current stress is the U.S. banking system.”

Elsewhere, EUR/USD rose 0.8% to 1.0730, hovering near a one-month high with the single currency benefiting from the dollar selloff.  

Additionally, the European Central Bank meets later this week, and is widely expected to raise interest rates by 50 basis points as inflation data last week pointed to underlying price pressure remaining elevated.

GBP/USD rose 0.6% to 1.2105, helped by the news HSBC (LON:HSBA) has agreed with the Bank of England to buy the U.K. operations of Silicon Valley Bank, helping to make sure there is no contagion from the collapse of the U.S. lender late last week.

The U.K. government also presents the Budget on Wednesday, and Chancellor Jeremy Hunt is expected to prioritize keeping public finances steady given his predecessor’s difficulties.

USD/JPY fell 0.2% to 134.60, not far off a one-month high, the AUD/USD rose 1.4% to 0.6670, on track for its biggest one-day percentage jump since Jan. 6, and USD/CNY edged lower to 6.9033.

#FOREX

2023-03-13 16:22:00

Come from : Investing.com