Asia FX under pressure as weak Chinese data, hawkish Fed weigh

Asia FX under pressure as weak Chinese data, hawkish Fed weigh

By Ambar Warrick

Investing.com -- Most Asian currencies moved in a flat-to-low range on Thursday, coming under pressure from softer-than-expected Chinese inflation data, while persistent concerns over rising U.S. interest rates and a hawkish Federal Reserve also weighed.

The Chinese yuan fell 0.2% and was among the worst performers for the day after consumer and producer inflation read weaker than expected for February. The reading, coupled with weak trade data earlier this week and a soft GDP forecast for the year, ramped up concerns that a Chinese economic rebound may not be as pronounced as initially expected.

Soft inflation gives the People's Bank less headroom to eventually tighten policy - which, coupled with rising U.S. interest rates, is likely to batter the yuan in the near-term. The currency was close to breaking below the key 7 level against the dollar, which could herald more losses.

Weakness in China bodes poorly for broader Asian markets, given their reliance on the country as a major trading hub. Other China-exposed currencies were also under pressure, with the Taiwan dollar and the South Korean won losing 0.2% each.

Broader Asian currencies were nursing steep losses for the week after Federal Reserve Chair Jerome Powell warned that U.S. interest rates will likely rise more than market expectations, due to strength in the jobs market and stubborn inflation.

His comments sparked a rally in the dollar and U.S. Treasury yields, drawing capital away from most Asian markets. The dollar hovered just below a three-month high against a basket of currencies on Thursday, with the dollar index and dollar index futures losing 0.1% each.

Overnight data indicated continued strength in the labor market, with a gauge of private payrolls rising more than expected in the month through mid-February.

Focus is now squarely on nonfarm payrolls data from the labor department, due on Friday. Any signs of strength in the U.S. economy give the Fed more space to keep raising rates.

Still, some Asian currencies attempted a recovery from sharp losses earlier this week. The Australian dollar rose 0.4% after sinking to an over three-month low this week, while the Japanese yen jumped 0.4% after hitting an over two-month low.

But the upside for the yen remained limited, with the Bank of Japan widely expected to hold interest rates at record-low levels on Friday. The bank is also expected to maintain its yield curve control measures, keeping local liquidity high and the yen subdued.

Data on Thursday showed Japan's economy stagnated in the fourth quarter, amid pressure from high inflation and weak manufacturing.

# FOREX

2023-03-09 14:17:00     Come from : Investing.com

Lebanon banks 'have no liquidity,' says bank association secretary general

Lebanon banks 'have no liquidity,' says bank association secretary general

BEIRUT (Reuters) - Lebanon's commercial banks do not have enough liquidity to pay back depositors, the secretary general of the country's banking association said on Wednesday in a letter that laid out the banks' positions.

The letter was signed by the Association of the Banks of Lebanon (ABL)'s Fadi Khalaf and served as the introduction to the ABL's monthly report. Khalaf said it represented his "opinion and personal analysis".

The letter said commercial banks had approximately $86.6 billion deposited at Lebanon's Central Bank as of mid-February, and a net negative position with correspondent banks of $204 million as of Jan. 31, 2023.

"These numbers show without a doubt that the banks have no liquidity," Khalaf wrote.

Lebanon has been in the throes of a financial meltdown that has cost the local currency more than 98% of its value and pushed more than 80% of the population below the poverty line.

The crisis erupted in 2019, following decades of corrupt government, profligate spending and financial mismanagement, and saw banks impose restrictions on withdrawals and transfers although a capital controls law had not been adopted.

That sparked snowballing anger against the financial institutions, but the banks say the policies of the state and the Central Bank are to blame.

Lebanon's caretaker deputy prime minister Saade Chami, the architect behind the country's stalled recovery roadmap, told Reuters last year that banks should "go first" in absorbing the losses stemming from the financial sector.

Those losses are estimated at around $72 billion.

Lebanon is working to address the crisis through talks with the International Monetary Fund to gain access to $3 billion that could kickstart the economy.

But the IMF said last year that Lebanon's progress in implementing required reforms remained "very slow", with the bulk yet to be carried out.

# FOREX

2023-03-08 20:32:00     Come from : Reuters

Dollar climbs to 3-month highs; hawkish Powell provides support

Dollar climbs to 3-month highs; hawkish Powell provides support

By Peter Nurse

Investing.com - The U.S. dollar climbed to three-month highs Wednesday after Federal Reserve Chair Jerome Powell guided towards a higher terminal rate than previously expected on the first day of his testimony before the U.S. Congress.

At 03:10 ET (08:10 GMT), the US Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% higher at 105.705, having earlier climbed to its highest level in three months at 105.868.

Powell went in front of the Senate Banking Committee on Tuesday, and said that recent U.S. inflation and jobs data had been stronger than expected, and thus interest rates would likely have to increase by more than had seemed likely previously.

This resulted in U.S. Treasury yields surging higher, with two-year yields climbing past 5% for the first time since 2007, and a further inverting of the yield curve.

Powell returns to Capitol Hill later Wednesday, this time testifying to the House Financial Services Committee.

Ahead of this, there is more economic data to study, in the form of the February ADP nonfarm employment change and the JOLTS job openings for January.

These will provide clues about the health of the U.S. labor market ahead of Friday’s official jobs report, which is expected to show the economy added 200,000 jobs last month.

Elsewhere, EUR/USD traded largely unchanged at 1.0545, after earlier falling to a two-month low at 1.0525, recovering after German industrial production rebounded by more than expected in January, rising 3.5% on the month after a revised drop of 2.4% the prior month.

Recent data has tended to suggest that the Eurozone’s largest economy has weathered the storm of soaring energy prices better than had been feared.

That said, the country’s consumers are still under pressure, as retail sales fell 0.3% on the month in February, an improvement from the 5.3% drop in January but still below expectations.

European Central Bank President Christine Lagarde is scheduled to speak in Geneva later in the session, and her comments will be studied carefully for clues of future monetary policy.

GBP/USD edged lower to 1.1823, falling to multi-month lows following Powell’s hawkish comments, and could drop further in the coming months, according to Bank of England policy maker Catherine Mann.

“There has been quite a hawkish tone coming from the Federal Reserve and ECB,” Mann said in an interview on Tuesday. “An important question in regards to the pound is how much of that existing hawkish tone is already priced into the pound. If Fed hawkishness is not priced in, the pound could fall further.”

USD/JPY rose 0.3% to 137.56 to a near three-month high, with the soaring U.S. yields weighing heavily on the yen, AUD/USD rose 0.2% to 0.6595, after sharp losses overnight, and USD/CNY rose 0.1% to 6.9708, nearing the significant 7-per-dollar level.

# FOREX

2023-03-08 16:26:00     Come from : Investing.com

Asia FX rattled by hawkish Fed talk, dollar hits 3-month high

Asia FX rattled by hawkish Fed talk, dollar hits 3-month high

By Ambar Warrick

Investing.com -- Most Asian currencies sank on Wednesday and the dollar hit a three-month high after Federal Reserve Chair Jerome Powell warned that the central bank will likely raise interest rates more than expected, darkening the outlook for regional markets.

Powell said in a testimony to Congress that recent resilience in the U.S. economy meant that the Fed needed to act more aggressively to bring down inflation. This saw markets begin pricing in a higher pace of interest rate hikes by the Fed in the coming months.

The dollar index and dollar index futures rose 0.2% to a three-month high on Wednesday, following an overnight spike in Treasury yields. U.S. 2-year yields cleared the 5% level for the first time since 2007.

Strength in the dollar and more attractive yields chipped away at demand for Asian currencies, as the gap between risky and low-risk returns narrowed. This trend had battered regional currencies through 2022, and is likely to persist in the near-term.

Markets are awaiting more cues on the U.S. economy from the Fed’s Beige Book report due later today, as well as nonfarm payrolls data on Friday.

Persistent concerns over China also weighed, following mixed trade data and warnings of a potential conflict between the two largest economies in the world.

The Chinese yuan fell 0.2% and was close to breaching the key 7 level against the dollar, which could trigger even more losses in the currency. Data released on Tuesday showed that while the country logged a record trade surplus in February, its imports also fell much more than expected, pointing to weak demand in Asia’s largest economy.

Risk-heavy Southeast Asian currencies were the worst performers for the day, with the Malaysian ringgit tumbling nearly 1.2%. The Indonesian rupiah and the Philippine peso also lost 0.7% apiece.

The Japanese yen sank 0.5%, also coming under pressure as weak economic readings this week reinforced expectations that the Bank of Japan will keep its ultra-loose policy unchanged on Friday. Japan's current account deficit widened more than expected in January, while data on Thursday is expected to reiterate that the Asian economy slowed substantially in the fourth quarter of 2022.

A looming leadership change in the BOJ is also likely to see little impetus for altering policy.

The Indian rupee fell 0.2% in catch-up trade, while the Australian dollar rose 0.2% after logging steep losses on Tuesday.

# FOREX

2023-03-08 13:59:00     Come from : Investing.com

Dollar clears 3-month high, yields surge on hawkish Powell

Dollar clears 3-month high, yields surge on hawkish Powell

By Ambar Warrick

Investing.com -- The U.S. dollar hit a three-month high against a basket of currencies on Wednesday, tracking a spike in Treasury yields after Federal Reserve Chair Jerome Powell said that interest rates were likely to rise more than market expectations.

The dollar index and dollar index futures rose about 0.2% each in Asian trade, hitting their highest levels since early-December. The two instruments also surged about 1.3% on Tuesday.

Powell said in a testimony before Congress that the Fed is likely to raise interest rates more than market expectations, following recent resilience in the U.S. economy. This saw markets rapidly begin pricing in a greater chance of 50 basis point hike in March, up from prior expectations for a rise of 25 bps.

U.S. Treasury yields also surged in overnight trade, with a bias towards short-term yields. This in turn caused a further deepening in the yield curve, with spreads between two-year and 10-year yields close to their lowest level since October.

Two-year yields also surged past 5% for the first time since 2007.

Powell’s comments come after stronger-than-expected inflation and labor market readings for January showed that the Fed likely needed to tighten policy further to ensure a sustained downtrend in inflation.

The central bank hiked rates by a cumulative 450 basis points since March 2022 to an upper range of 4.75%, which had seen market positioning for a terminal rate - i.e., a peak - of around 5.5%.

But with inflation still showing signs of stickiness, markets are now positioning for rates potentially breaching 6%.

Focus this week is largely on more cues on the Fed and the labor market, with the central bank’s Beige Book report on the economy due later on Wednesday.

Nonfarm payrolls data for February is due on Friday, with any signs of strength in the economy giving the Fed more headroom to keep raising rates.

Rising interest rates have drummed up fears of a sharp slowdown in the U.S. economy later this year. An inverted yield curve is regarded by markets to be a classic signal that traders are positioning for a potential recession.

# FOREX

2023-03-08 12:58:00     Come from : Investing.com

What China’s New, Powerful Financial Regulator Means for PBOC

What China’s New, Powerful Financial Regulator Means for PBOC

(Bloomberg) -- China’s sweeping changes to the financial regulatory system will see the central bank lose some of its functions to a new and enlarged oversight body, leaving it focused on broader economic and financial stability management.

The banking and insurance watchdog will be absorbed into a new bureau — a national financial regulatory administration — to oversee all financial sectors except the securities industry, according to a plan released at the National People’s Congress on Tuesday. Under the revamp, the People’s Bank of China will no longer have oversight of financial holding companies and financial consumer protection. 

It’s a similar regulatory model used in Australia, which has three separate bodies overseeing the financial system. In fact, a PBOC adviser said in 2018 it was drawing on the experience of Australia as well as the UK as it shapes its regulatory framework. 

Here are some of the key takeaways from the government overhaul and what it means for the central bank:

Modeling Australia’s system

Xing Zhaopeng, a senior China strategist at Australia & New Zealand Banking Corp., said the changes announced Tuesday would make China’s system most similar to Australia’s. 

Under that model, the Reserve Bank of Australia is charged with conducting monetary policy, working to maintain a strong financial system and issuing the nation’s currency; the Australian Securities and Investments Commission is the nation’s corporate, markets and financial services regulator; while the Australian Prudential Regulation Authority supervises banks, insurers and the pensions industry. 

What Bloomberg Economics Says...

These steps provide clear mandates and boundaries for the institutions regulating the financial sector. In this regard, the new structure removes regulatory gaps and overlaps.

David Qu, China economist

China has kept the China Securities Regulatory Commission, which overseas the securities and futures markets, as an individual entity. The new beefed up financial regulator will oversee micro-level market behavior and financial institutions and consumer rights, while the PBOC will be charged with managing macro-level or systemic risks and financial stability through the macroprudential mandate.

A more streamlined central bank

The PBOC will cut its county-level branches, which will be absorbed to city-level branches, according to Tuesday’s report. It will remove a clutch of branches that each oversees work in multiple provinces, and instead set up 31 provincial-level branches along with five separate branches in cities including Shenzhen.

Changes to the regional branches reverses a structuring plan set up in the late 1990s after the Asian Financial Crisis, according to Bruce Pang, chief economist for Greater China at Jones Lang LaSalle Inc. Some cross-provincial branches were created at the time in order to avoid conflicts with provincial level governments. 

With governance of local authorities becoming more centralized, it means there’s less need for cross-provincial branches, as provincial-level branches can better facilitate the execution of policies, Pang said.

Greater focus on risk control

Duncan Wrigley, chief China economist at Pantheon Macroeconomics Ltd., said the regulatory reforms will “close opportunities for regulatory arbitrage,” such as online finance companies performing de facto banking functions like lending, with much lower capital requirements than banks. 

Ant Group Co. is a case in point. Chinese regulators halted Ant’s would-be record initial public offering at the last minute in 2020 and rushed to issue new rules to regulate online lenders including Ant.

John Yasuda, a professor at Johns Hopkins University who specializes in regulatory governance in China, said there had been a “growing sense that the segmented regulatory system was allowing some financial products to fall between the stools.”

He said the Financial Stability and Development Committee — a regulatory body created under the State Council in 2017 and led by Vice Premier Liu He — was designed to play a coordinating role in regulating the financial system. However, the changes suggest “the forces of consolidation are now gaining the upper hand,” he said.

Some things remain the same

The PBOC remains under the State Council, China’s cabinet. Its goals — according to law — is to set and implement monetary policy as well as prevent financial risks under the leadership of the State Council. 

Unlike independent peers in most developed economies, the PBOC needs the State Council’s approval on major policy steps, such as adjustments to interest rates and money supply. While there’s some scope to manage liquidity at its discretion, Federal Reserve or RBA-style independence remains a distant proposition. 

The regulatory revamp “will make the PBOC more focused on implementing monetary policy, and thus closer to international norms,” said Wrigley “But it is under State Council leadership, and in that respect very different from the independent central banks in most advanced economies.”

# FOREX

2023-03-08 11:54:00     Come from : Bloomberg

Dollar slips lower ahead of keenly awaited Powell testimony

Dollar slips lower ahead of keenly awaited Powell testimony

By Peter Nurse

Investing.com - The U.S. dollar slipped lower in early European trade Tuesday ahead of a testimony by Federal Reserve Chair Jerome Powell before U.S. Congress, while sterling gained after signs of a resilient housing market.

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 104.275.

Powell starts his two-day testimony before Congress later this session, starting with the Senate Banking Committee, and is likely to provide more cues on monetary policy in the coming months.

Resilience in the jobs market and stubborn inflation have prompted a number of Fed policymakers to call for more interest rate increases, keeping the policy rate higher for longer.

However, traders noted that Powell mentioned "disinflation" at his last press conference and are wary that he may try to temper the overall hawkish tone to provide the Fed with more flexibility to pursue the policies it deems necessary.

The Fed slowed the pace of rate hikes to 25 basis points at its last meeting on Feb. 1, after a 50-basis-point increase in December that came in the wake of four consecutive 75-basis-point increases.

Elsewhere, GBP/USD rose 0.1% to 1.2029 after data from mortgage lender Halifax showed that U.K. house prices rose 1.1% in February, the quickest monthly pace since June.

This points to resilience in the country's property market that may prevent a deep decline, and the difficulties associated with negative equity as interest rates rise.

EUR/USD fell 0.1% to 1.0674, having gained 0.5% overnight after Austrian central bank chief Robert Holzmann, a known hawk on the European Central Bank's Governing Council, called for interest rate increases of 50 basis points at each of its next four meetings to combat inflation.

Citigroup expects the ECB to hike rates by 50 basis points each in March and May to push its policy rates to about 4% by July.

German factory orders rose 1.0% on the month in January, much stronger than the expected 0.9% fall, while the prior month's growth was revised higher to 3.4%.

AUD/USD fell 0.6% to 0.6688, even after the Reserve Bank of Australia hiked interest rates and said it would tighten policy further to combat inflation. The central bank also noted that inflation had likely peaked, which could potentially herald an eventual slowdown in the bank's rate hike cycle.

USD/JPY fell 0.2% to 135.62 after Japan's wage growth slowed substantially in January, data showed, relieving the pressure on the Bank of Japan to tighten monetary policy.

# FOREX

2023-03-07 16:29:00     Come from : Investing.com

Asia FX muted amid U.S.-China tensions, dollar dips before Powell

Asia FX muted amid U.S.-China tensions, dollar dips before Powell

By Ambar Warrick

Investing.com -- Most Asian currencies moved in a tight range on Tuesday as concerns over rising U.S.-China tensions weighed, while the dollar weakened amid some bets that Federal Reserve Chair Jerome Powell will strike a less hawkish note during a testimony later in the day.

China’s yuan fell 0.1% after Foreign Minister Qin Gang warned that a conflict with the U.S. could escalate if Washington does not soften its rhetoric against China.

His comments rattled sentiment towards China, largely offsetting data that showed the country logged a record trade surplus in February. But a bigger-than-expected decline in Chinese imports, coupled with a weak GDP forecast for 2023, raised concerns over a staggered economic recovery in the country.

Broader Asian currencies kept to a small range, with the Japanese yen falling 0.1%. Data showed that Japan’s wage growth slowed substantially in January, putting less impetus on the Bank of Japan to tighten its ultra-loose policy.

The Australian dollar fell 0.2% even as the Reserve Bank hiked interest rates and said it would tighten policy further to combat inflation. But the bank also noted that inflation had likely peaked in Australia, which could potentially herald an eventual slowdown in the bank’s rate hike cycle.

The Indonesian rupiah led losses in Southeast Asia with a 0.4% drop, while the Thai baht was muted as inflation read lower than expected for February.

The Philippine peso also traded sideways following a softer-than-expected inflation reading.

The dollar extended overnight losses against a basket of currencies, amid some bets that a recent cooling in the U.S. economy could elicit a less hawkish stance from the Fed’s Powell during a two-day testimony before Congress, which begins later on Tuesday.

The dollar index and dollar index futures fell 0.1% each, and were nursing steep losses from the prior week. U.S. Treasury yields also retreated further overnight, although an inversion in the yield curve persisted.

Powell is widely expected to provide more cues on monetary policy in the coming months, especially as resilience in the jobs market and stubborn inflation drove up fears of a more hawkish Fed.

But U.S. economic activity was also seen cooling under the yoke of high inflation and interest rates, with manufacturing activity contracting further in February.

Rising U.S. rates bode poorly for Asian currencies, as the gap between risky and low-risk debt narrows. The trend had battered Asian markets through 2022.

# FOREX

2023-03-07 14:10:00     Come from : Investing.com

Dollar subdued ahead of Powell testimony

Dollar subdued ahead of Powell testimony

By Ankur Banerjee

SINGAPORE (Reuters) - The dollar was subdued on Tuesday ahead of testimony by Federal Reserve chair Jerome Powell, which investors will focus on for cues of the path the U.S. central bank is likely to take in tackling sticky inflation.

The dollar index, which measures the U.S. currency against six major rivals, was 0.067% higher at 104.31, having skidded 0.26% overnight. The index is down 0.6% for the month following a 2.6% gain in February.

The Australian dollar rose 0.01% against the U.S. dollar at $0.673 ahead of the Reserve Bank of Australia's policy decision later in the day where a quarter-percentage point rate hike is widely expected.

The euro was 0.03% lower at $1.0675, having risen nearly 0.5% overnight. Sterling was last trading at $1.2025, up 0.03% on the day, while the kiwi fell 0.08% to $0.619.

The Japanese yen weakened 0.15% to 136.14 per dollar ahead of the final policy meeting for Bank of Japan Governor Haruhiko Kuroda on Thursday and Friday.

Powell's testimony before Congress on Tuesday and Wednesday will largely dictate currency market moves this week, with the February jobs report due on Friday also keenly awaited.

Kevin Cummins (NYSE:CMI), chief economist at NatWest Markets, said Powell would likely express heightened concern around inflation but would probably stop short of raising expectations for a 50 basis point hike on March 22.

After delivering jumbo hikes last year, the Fed raised interest rates by 25 basis points at its past two meetings, but resilient economic data throughout February stoked fears of the central bank going back to large hikes.

"We suspect he (Powell) will sound noncommittal for now and take his cues from the looming upcoming key data," said Cummins, who expects the Fed to raise interest rates by 50 basis points.

Fed funds futures traders are pricing in a 76% probability the Fed will raise rates by 25 basis points at its March meeting. They also expect interest rates to peak at 5.48% in September and still be above 5% at the end of the year.

"What has become clear to financial markets is that inflation is proving far stickier than most had felt at the start of the year," ING economists said.

"A return to the disinflation and weaker dollar narrative will have to wait."

========================================================

Currency bid prices at 0115 GMT

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Euro/Dollar $1.0679 $1.0684 -0.04% -0.33% +1.0687 +1.0676

Dollar/Yen 136.1000 136.0800 -0.03% +3.66% +136.1650 +136.0350

Euro/Yen 145.36 145.17 +0.13% +3.61% +145.4000 +145.1600

Dollar/Swiss 0.9312 0.9308 +0.05% +0.71% +0.9314 +0.9308

Sterling/Dollar 1.2027 1.2027 +0.01% -0.54% +1.2029 +1.2017

Dollar/Canadian 1.3613 1.3612 +0.03% +0.49% +1.3618 +1.3612

Aussie/Dollar 0.6728 0.6732 -0.04% -1.28% +0.6733 +0.6728

NZ 0.6192 0.6197 -0.08% -2.48% +0.6198 +0.6190

Dollar/Dollar

All spots

Tokyo spots

Europe spots

Volatilities

Tokyo Forex market info from BOJ

# FOREX

2023-03-07 09:50:00     Come from : Reuters