Dollar edges lower ahead of payrolls; yen weakens after BOJ stands pat

Dollar edges lower ahead of payrolls; yen weakens after BOJ stands pat

By Peter Nurse

Investing.com - The U.S. dollar edged lower in early European trade Friday ahead of the key monthly jobs report, and the yen weakened after the Bank of Japan retained its ultra-dovish stance.

At 03:00 ET (08:00 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.2% lower at 105.125, but was on track for a weekly gain of 0.7%.

The dollar has handed back some of the week’s strong gains after the weekly jobless claims data, released on Thursday, showed that the number of Americans filing new claims for unemployment benefits increased by the most in five months.

However, losses are minor as traders await the release of the widely-watched monthly payrolls report later in the session. This was an economic release that Federal Reserve Chair Jerome Powell specifically mentioned earlier this week as influencing the thinking of the central bank policymakers as far as further interest rate hikes are concerned.

Nonfarm payrolls are expected to have increased by 205,000 jobs last month, a slowdown from the blockbuster 517,000 added in January, but the possibility of another upside surprise exists, especially after Powell’s hawkish tone in his semi-annual testimony to Congress.

Elsewhere, USD/JPY rose 0.2% to 136.32 after the Bank of Japan held interest rates at record lows earlier Friday, and said it will continue with its very soft monetary policy in the last meeting with Governor Haruhiko Kuroda in control.

Kazuo Ueda is set to take over the leadership of the central bank, and has signaled that he will maintain the BOJ’s ultra-dovish stance, at least in the near term.

EUR/USD rose 0.2% to 1.0602 after German consumer prices, harmonized to compare with other European Union countries, rose by 9.3% on the year in February, up 1.0% on the month.

Although these numbers confirm the preliminary data, they illustrate the difficulties the European Central Bank will have bringing inflation in the Eurozone back down to its medium-term target of 2.0%.

GBP/USD rose 0.2% to 1.1947 after data released earlier Friday showed that U.K. gross domestic product rose by 0.3% month-on-month in January, above the expected 0.1%.

Signs the British economy is proving somewhat resilient could help the Bank of England to decide to raise interest rates again this month.

AUD/USD rose 0.2% to 0.6600, NZD/USD rose 0.2% to 0.6114 and USD/CNY edged higher to 6.9660.

USD/TRY rose 0.1% to 18.9678, with the Turkish lira near a record low against the dollar following last month’s massive earthquakes and as the country continues the unorthodox monetary policies under President Tayyip Erdogan.

The lira lost some 30% of its value against the dollar in 2022 and 44% the year before.

# FOREX

2023-03-10 16:14:00     Come from : Investing.com

Asia FX sinks before labor data, yen falls as BOJ stands pat

Asia FX sinks before labor data, yen falls as BOJ stands pat

By Ambar Warrick

Investing.com -- Most Asian currencies fell on Friday as markets turned cautious ahead of key U.S. labor market data due later in the day, while the Japanese yen fell after the Bank of Japan maintained its ultra-dovish stance.

The yen sank 0.4%, sticking close to its lowest levels for the year after the BOJ held interest rates at record lows, and offered no changes to its ultra-dovish policy ahead of a change in leadership at the bank.

Friday’s meeting was the last under Governor Haruhiko Kuroda, with economist Kazuo Ueda likely to take over from next month. Ueda has also signaled that monetary policy will remain accommodative in the near term, although analysts are predicting an eventual pivot by end-2023.

Separate data showed that Japanese producer price inflation eased for a second consecutive month, coming in line with the BOJ’s forecast that inflation will ease in the near-term. But the central bank’s dovish stance is likely to keep the yen muted in the near-term.

Broader Asian currencies fell, with most units set for steep weekly losses as fears of more increases in U.S. interest rates battered markets this week. Focus is squarely on nonfarm payrolls data for February, due later in the day, for more cues on U.S. monetary policy.

The Singapore dollar, South Korean won, and Taiwan dollar all lost about 0.2% each.

Any signs of resilience in the jobs market give the Federal Reserve more headroom to raise interest rates. This, coupled with hotter-than-expected inflation, is likely to drive interest rates beyond market expectations, Fed Chair Jerome Powell warned this week.

But higher-than-expected weekly jobless claims saw the dollar retreat against a basket of currencies in overnight trade, amid some hopes that the labor market was cooling.

The dollar index and dollar index futures were flat on Friday, hovering just below their strongest levels in three months.

The Chinese yuan was flat on Friday, but was set to lose 0.9% this week following a string of weak economic readings from the country. Softer-than-expected trade and inflation data indicated a potentially staggered economic recovery in China, even as the country relaxed most anti-COVID measures earlier this year.

Fears of a sluggish Chinese recovery also weighed on broader Asian currencies, given the country’s importance as a trade partner for most of the region.

# FOREX

2023-03-10 14:08:00     Come from : Investing.com

Dollar loses steam after jobless claims data; Kuroda takes centre stage in Asia

Dollar loses steam after jobless claims data; Kuroda takes centre stage in Asia

By Rae Wee

SINGAPORE (Reuters) - The dollar paused its ascent on Friday after a rise in jobless claims in the United States implied possibly easing conditions in the labour market and tempered expectations of further aggressive rate hikes from the Federal Reserve.

In Asia, moves were subdued as markets remained on guard ahead of the Bank of Japan's (BOJ) monetary policy decision at the conclusion of a policy meeting, the last to be chaired by incumbent BOJ Governor Haruhiko Kuroda before he steps down in April.

The yen held steady in early Asia trade, and was last 0.2% higher at 135.89 per dollar, retreating from a nearly three-month low hit earlier in the week.

The BOJ is widely expected to maintain ultra-low interest rates on Friday and refrain from major changes to its controversial bond-yield control policy, leaving options open ahead of a leadership transition in April.

"In theory, it should be a non-event, but there is a non-zero chance that Kuroda goes out with a bang and alters yield curve control," said Chris Weston, head of research at Pepperstone.

The yen has come under downward pressure again in recent weeks as the BOJ has remained ultra dovish, while interest rate expectations in the United States have ramped up.

That has caused the yen to weaken from January highs, and reversing a rally that followed a surprise tweak to yield curve control by the BOJ in December.

Elsewhere, the U.S. dollar slipped marginally on Friday.

The euro rose 0.13% to $1.0595, while sterling edged 0.05% higher to $1.1932, both some distance from multi-month lows hit on Wednesday.

The kiwi gained 0.07% to $0.6106, but the Aussie slipped 0.13% to $0.6582.

Data released on Thursday showed that the number of Americans filing new claims for unemployment benefits increased by the most in five months last week, though the underlying trend remained consistent with a tight labor market.

Nonetheless, the jump in jobless claims was enough to cause traders to unwind some bets that U.S. rates would rise much higher than previously expected. Futures pricing now implies a roughly 54% chance that the Fed will raise rates by 50 basis points this month, compared with 70% before the data release.

The Fed funds rate is projected to peak just below 5.5% by July.

Against a basket of currencies, the U.S. dollar index fell 0.12% to 105.12 but remained on track for a weekly gain of nearly 0.6%. It surged earlier in the week after Fed Chair Jerome Powell struck a more hawkish tone than markets had expected at his semi-annual testimony before the Senate Banking Committee.

Focus now turns to the closely watched nonfarm payrolls report due later on Friday, the next major data point that could offer clues on the Fed's next steps for monetary policy.

According to a Reuters survey of economists, nonfarm payrolls likely increased by 205,000 jobs in February after surging by 517,000 in January.

"The payrolls report has surprised us on the high side for, I think, about 10 straight months now, so it's been a sign of real strength for the U.S. economy," said Jarrod Kerr, chief economist at Kiwibank.

"It is a little frustrating for the Fed. They've obviously tightened a lot, hoping it'll have an effect. But we've seen bounce back in a lot of activities indicators in recent months. So it looks like the job's not done."

# FOREX

2023-03-10 09:50:00     Come from : Reuters

Turkish lira falls to record low near 19 to the dollar

Turkish lira falls to record low near 19 to the dollar

ANKARA (Reuters) - Turkey's lira weakened to a fresh record low of 18.9620 against the dollar on Thursday, as investors weigh the economic impact of massive earthquakes that hit the country last month.

Presidential and parliamentary elections scheduled for May 14 are adding to uncertainty. They will determine whether Turkey continues with unorthodox policies under President Tayyip Erdogan or reverts to orthodoxy as promised by the opposition.

Separately, Turkey's Treasury said on Thursday it had borrowed $2.25 billion in a eurobond issue maturing in 2029, bringing the amount it borrowed from international markets to $5 billion this year.

The yield to investor in the latest issue was 9.50%, down from 9.75% in the eurobond issued in January, the Treasury said, adding that demand was more than triple the amount issued.

More than a third of the amount issued was sold to investors in the United Kingdom and more than 20% to those in the United States, it said.

The lira has been largely stable since August thanks to authorities' heavy hand in the forex market, including a decline of about $9.4 billion in reserves since the first quake hit in early February.

Dipping into reserves has been a regular feature of the government's unorthodox economic policy in recent years, especially since a historic currency collapse in late 2021.

The central bank replenishes its reserves in several ways, including requiring exporters to sell a portion of revenues to it. Authorities took several steps to cool demand for FX after the earthquake, widening the spread in FX and gold trades.

Flows of international aid will help ease the pressure, many bankers say, requesting anonymity due to sensitivity around discussing state policy.

In the latest such support, the European Bank for Reconstruction and Development (EBRD) said on Thursday that it will invest up to 1.5 billion euros ($1.6 billion) in the next two years.

The lira lost some 30% of its value against the dollar in 2022 and 44% the year before.

It is likely to hover around 19 to the dollar until the end of the election cycle, largely thanks to forex interventions, but would likely decline further in the long term if Erdogan wins the election, Wells Fargo (NYSE:WFC) said in a note.

Under a scenario where the opposition wins, the lira would rally sharply due to more conventional policy, potentially firming up to 20% by the end of the second quarter, the bank said.

Turkey's international bonds also came under pressure with longer-dated issues falling around half a cent in the dollar, according to Tradeweb.     The premium investors demanded to hold the country's hard-currency bonds over safe-haven U.S. Treasuries has risen sharply over the past two sessions, adding 18 basis points to rise to 446 bps since hitting a two-month low on Tuesday.

# FOREX

2023-03-09 19:51:00     Come from : Reuters

Bank of Canada and Fed head for historic divergence, in a blow to loonie

Bank of Canada and Fed head for historic divergence, in a blow to loonie

By Fergal Smith

TORONTO (Reuters) - As the Bank of Canada pauses its interest rate hikes, investors are betting that the sensitivity of Canada's economy to higher borrowing costs will result in a historically large gap between the tightening campaigns of the BoC and the U.S. Federal Reserve.

Analysts have long argued that Canada's economy is more sensitive to interest rate hikes than the U.S. economy, pointing to the higher debt loads of Canadians after they participated in a red-hot housing market in recent years and the shorter Canadian mortgage cycle.

But now some major economic data has given substance to that view and supports the market's recent move to price in a wider gap between the end points for interest rate hikes in Canada and the United States, say analysts.

Canadian inflation slowed more than expected to 5.9% in January and gross domestic product was flat in the fourth quarter, held back by weakness in the interest rate-sensitive parts of the economy, including housing investment as well as business spending on machinery and equipment.

A lower expected peak for Canadian rates has pressured the Canadian dollar against its U.S. counterpart. The currency hit a four-month low on Wednesday at 1.3815, or 72.39 U.S. cents, after the BoC left its benchmark interest rate on hold at 4.50%, becoming the first major central bank to suspend its tightening campaign.

A weaker currency could drive up the cost of imported goods for Canadians, adding to inflation pressures.

"The Canadian economy is just far more sensitive to interest rates because of factors like the crazy amount of debt-to-income that we've got, because of our overheated housing market," said Jay Zhao-Murray, a market analyst at Monex Canada Inc. "The transmission channels of monetary policy are more effective in Canada than in the U.S."

Contrasting with the BoC, Fed Chair Jerome Powell delivered a message this week of higher and potentially faster rate hikes.

Money markets expect the BoC's policy rate to peak at about 4.75% this year, or roughly 90 basis points below the expected end point of the Fed.

Canadian rates have peaked below U.S. rates in the three major tightening cycles since the start of the millennium, with the gap ranging between 50 and 75 basis points.

"Poring over the national accounts, it's increasingly clear that interest-sensitive demand has wilted in Canada," Warren Lovely and Taylor Schleich, strategists at National Bank of Canada (OTC:NTIOF), said in a note after the recent GDP data.

Their work shows that interest rate-sensitive demand in Canada's economy was 26% of final domestic demand at the start of the current rate hike cycle, one of the highest shares on record, compared with 21% for the United States.

Still, there could be a limit to how much interest-rate divergence the BoC will allow, say analysts. Last October, Governor Tiff Macklem warned that the bank might tighten more aggressively in response to a weaker currency after the loonie hit a two-year low of 1.3977.

"If the spread diverges any further there is going to be further depreciation of the Canadian dollar and that will feed in to eventually inflation in this country," said Royce Mendes, head of macro strategy at Desjardins.

# FOREX

2023-03-09 19:17:00     Come from : Reuters

Bolivia looks to calm dollar frenzy as shortage fears pressure FX

Bolivia looks to calm dollar frenzy as shortage fears pressure FX

By Daniel Ramos and Monica Machicao

LA PAZ (Reuters) - Bolivia's government is battling to calm fears among savers and businesses about a shortage of dollars in the country, which has led to long lines outside banks, rattled local bonds and pushed up the price of greenbacks in informal markets.

High global prices, falling gas exports and state spending to prop up the economy, has led some currency exchanges to run out dollars, sparking panic and further fanning concern.

"I am looking for dollars here because last week I went to the exchange houses in El Alto, but I couldn't find any," said Paulina Mayta, who was still searching for hard currency.

"Everyone tells me there aren't any, there's none left. I owe in dollars and I have to spend in dollars."

Bolivia's central bank has warned of unusually high demand for dollars and has offered to sell dollars directly at the official exchange rate of 6.96/6.86 bolivianos per dollar where it's been pegged since 2011.

"The population that has not been able to satisfy their demand in dollars, either in the financial system or in the exchange houses, should come to the Central Bank of Bolivia," central bank president Edwin Rojas said on Monday.

"Unfortunately we have warned that these speculative attacks persist, especially at the level of social networks."

The landlocked South American country has seen net foreign currency reserve fall from a peak over $15 billion in 2014 to $3.8 billion at the end of 2022, hit by global inflation, weaker exports and spending to protect the currency peg.

The recent uncertainty has seen the cost of dollars rise to as much as 7.8 bolivianos in unofficial parallel markets, according to currency traders and Reuters checks.

Analysts said the central bank appeared to be moving to ensure the supply of dollars and would keep selling them to hold the official exchange rate steady, even though this risked burning through reserves further.

"We are going to guarantee the provision of U.S. dollars, people do not have to worry much," BCB treasury manager Claudia Soruco said at a press conference on Tuesday.

"It is not necessary for people to make these long lines because they can come in over the next few days."

# FOREX

2023-03-09 18:58:00     Come from : Reuters

Dollar edges lower, but remains elevated after Powell's testimony

Dollar edges lower, but remains elevated after Powell's testimony

By Peter Nurse

Investing.com - The U.S. dollar edged lower in early European trade Thursday, but remained elevated as Federal Reserve Chair Jerome Powell again pointed to further interest rate hikes to tackle inflation.

At 03:10 ET (08:10 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% lower at 105.543, remaining near its three-month peak of 105.880 hit in the previous session.

Powell returned to Capitol Hill on Wednesday for the second day of his semi-annual testimony, this time in front of the House Financial Services Committee.

He repeated his previous comments that the U.S. central bank will likely need to raise interest rates more than expected, and possibly in larger steps, as recent economic data had proved to be stronger than expected, pointing to persistent inflationary pressures.

He did make the concession that the debate of future rate hikes, including the expected increase in March, was still underway and would be data-dependent.

This brings Friday’s official jobs report firmly into focus, especially after last month’s blockbuster report, and U.S. jobless claims data later on Thursday will act as a precursor.

Powell’s comments have pushed the 2-year U.S. Treasury yield above 5.5%, at a 16-year high, while the 2-10-year curve has inverted close to 110 basis points and is prompting growing fears of a Fed-induced recession.

“We cannot really look for a broad dollar decline until that disinflation story returns and acute U.S. yield curve inversion breaks by the short end coming lower,” said analysts at ING, in a note.

Elsewhere, EUR/USD rose 0.1% to 1.0555 and GBP/USD rose 0.1% to 1.1848, both recovering from their multi-month lows after the dollar edged lower.

USD/JPY fell 0.4% to 136.87, retreating from a near three-month high, AUD/USD rose 0.4% to 0.6612, and USD/CNY rose 0.3% to 6.9734, close to the widely-watched 7-per-dollar level after weaker-than-expected inflation data showed a hesitant Chinese economic recovery.

USD/CAD fell 0.1% to 1.3794 the day after the Bank of Canada suspended its monetary tightening, keeping its key overnight interest rate on hold at 4.50%.

# FOREX

2023-03-09 16:27:00     Come from : Investing.com

Investors turn more bearish on Asian FX amid return of King Dollar: Reuters Poll

Investors turn more bearish on Asian FX amid return of King Dollar: Reuters Poll

By Harshita Swaminathan

(Reuters) - Investors turned even more bearish on Asian currencies after China's tepid growth target and the U.S dollar's renewed strength after the Federal Reserve chair warned of higher and faster interest rates.

Bearish bets intensified on nearly all Asian currencies, with short bets on the South Korean won and the Chinese yuan reaching their highest since November, according to a fortnightly poll of 12 analysts.

About half of the poll responses were collected before Fed Chair Jerome Powell's hawkish comments earlier this week that had markets pricing in a 50 basis points (bps) rate hike at the central bank's meeting later this month.

This comes after weeks of broad consensus that 25 bps hikes would be the way forward.

The comments also led to the dollar index, which measures the currency against six peers, hitting a three-month high.

The risk sentiment in the market at this point is skewed to the downside, said analysts at Maybank, as the dollar, through the week, appeared to be supported by expectations of a hawkish Fed and weak China stimulus.

Short bets on the won were the highest among Asian currencies for the second week in a row. The won is more susceptible to the dollar's moves than its Asian peers, underpinned by its tech exports-reliant economy.

China dampened investor sentiment further, setting its annual growth target at 5%, below last year's 5.5% and undershooting market expectations of about 6%.

However, the Indian rupee, already the best performing currency in Asia so far this year, bucked the bearish trend as investors dialled back their short bets.

This could partly be due to positive seasonality for the country's trade balance and current account into the fiscal year end, said Michael Loh, an analyst at BNP Paribas (OTC:BNPQY).

Malaysia's central bank is widely expected to maintain interest rates for its second consecutive meeting, on Thursday. Short bets on the ringgit rose slightly.

The Asian currency positioning poll is focused on what analysts and fund managers believe are the current market positions in nine Asian emerging market currencies: the Chinese yuan, South Korean won, Singapore dollar, Indonesian rupiah, Taiwan dollar, Indian rupee, Philippine peso, Malaysian ringgit and the Thai baht.

The poll uses estimates of net long or short positions on a scale of minus 3 to plus 3. A score of plus 3 indicates the market is significantly long U.S. dollars.

The figures include positions held through non-deliverable forwards (NDFs).

The survey findings are provided below (positions in U.S. dollar versus each currency):

DATE USD/ USD/ USD/ USD/ USD/ USD/I USD/M USD/ USD/

CNY KRW {{2034|SGD IDIDR TWD NR YR PHP THB

09-Mar 0.68 1.3 0.65 0.56 0.78 0.28 0.78 0.42 0.3

-23

23-Feb 0.36 0.77 0.21 0.12 0.30 0.80 0.49 0.33 0.37

-23

09-Feb -0.8 -0.6 -0.7 -0.5 -0.6 0.25 -0.64 -0.4 -1.0

-23 0 3 2 3 8 0 0

26-Jan -1.2 -1.1 -1.4 -1.1 -0.6 -0.47 -1.25 -0.7 -1.7

-23 9 4 0 5 8 8 7

12-Jan -1.5 -1.3 -1.3 -0.1 -0.6 0.07 -0.82 -0.6 -1.8

-23 8 9 1 0 7 1 5

15-Dec 0.08 -0.5 -0.8 0.92 -0.2 0.63 -0.36 -0.1 -0.6

-22 5 5 2 5 9

1-Dec- 0.63 -0.1 -0.3 1.08 0.15 0.76 -0.02 0.33 -0.1

22 5 6

17-Nov 0.74 0.21 -0.0 1.06 0.84 1.13 1.18 0.89 0.4

-22 6

03-Nov 1.81 1.38 0.47 1.57 1.81 1.47 2.02 1.36 1.34

-22

20-Oct 1.96 2.02 1.13 1.83 1.98 1.60 2.33 1.94 2.00

-22

# FOREX

2023-03-09 14:55:00     Come from : Reuters