Asia FX rattled by rising yields, weak economic data

Asia FX rattled by rising yields, weak economic data

By Ambar Warrick

Investing.com-- Most Asian currencies sank on Thursday as growing fears of a more hawkish Federal Reserve spurred an overnight spike in Treasury yields, while a swathe of weak regional economic data also dented sentiment. 

More signs of stubborn inflation in the world’s largest economies drove up concerns that interest rates will remain higher for longer.

This largely offset optimism over a Chinese economic recovery, even as the world’s second-largest economy logged its strongest pace of business activity growth in over a decade.

China’s yuan was among the worst performers for the day, pulling back sharply from a 1% rally in the prior session. Both the yuan and its offshore counterpart lost about 0.4% to the dollar.

Focus this week is also on a meeting of high-level Chinese officials, which could result in broader government policy changes. 

Other China-exposed currencies also retreated from recent gains, with the Taiwan dollar and South Korean won losing 0.3% and 0.5%, respectively.

Weak economic readings also painted a bleak picture for broader Asian markets, despite indicators of a strong recovery in China. 

South Korean data showed that industrial production in the country slumped more than expected in January from the prior month. But production rose more than expected in January from the prior month, indicating that a bottom may be in sight.

The Japanese yen fell 0.2%, as data showed capital spending in the country remained firm even as business profits slipped in the fourth quarter. But while the reading may indicate some strength in the fourth quarter GDP, it also portends elevated inflation in the near-term.

Among Southeast Asian currencies, the Thai baht slid 0.5% after data showed that the country’s exports slumped far more than expected in January. Thailand’s trade deficit also widened more than expected during the month. 

Broader Asian currencies retreated as U.S. manufacturing prices data unexpectedly grew in February, raising concerns that inflation was back on an uptrend in the month. U.S. Treasury yields surged after the reading, with short-term yields scaling 16-year highs on bets that U.S. interest rates will remain higher for longer.

The dollar steadied on Thursday after logging sharp overnight losses against a basket of currencies. The dollar index and dollar index futures rose about 0.1% each, and were still close to near two-month highs.

Rising U.S. interest rates bode poorly for Asian currencies, as the gap between risky and low-risk debt narrows. 

# FOREX

2023-03-02 12:12:00     Come from : Investing.com

Dollar retreats, yuan soars after strong Chinese industrial activity data

Dollar retreats, yuan soars after strong Chinese industrial activity data

By Peter Nurse 

Investing.com - The US dollar retreated in Europe Wednesday while the Chinese yuan rose sharply after economic data pointed to a recovery in the second largest economy in the world, sparking risk-on sentiment.

At 02:55 ET (07:55 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.2% lower at 104.672.

Data released earlier Wednesday showed that China's manufacturing activity expanded at the fastest pace in more than a decade in February, confirming that the economic recovery in China gained momentum over the past month after the country relaxed most of its anti-COVID measures in January.

China's manufacturing Purchasing Managers' Index rose 52.6 in February, a climb from January's figure of 50.1. The non-manufacturing PMI also gained in February, to 56.3, well above than the prior month's reading of 54.4. 

Strength in both manufacturing and non-manufacturing activity saw China's composite PMI jump 56.4 in February - its fastest pace in over three years.

USD/CNY fell 0.5% to 6.9010, moving further away from its lowest level this year, while NZD/USD rose 0.8% to 0.6233 and AUD/USD climbed 0.5% to 0.6760, with these antipodean currencies often used as liquid proxies for the yuan.

Elsewhere, EUR/USD rose 0.4% to 1.0614, boosted by the risk-on sentiment ahead of the release of the manufacturing PMIs for the Eurozone, Germany and France later in the day.

Inflation data from the German region of North Rhine-Westphalia, the country's industrial heartland, rose 1.0% on the month in January, an annual gain of 8.5%.

This, coupled with hotter than expected numbers from both France and Spain on Tuesday, suggests that the European Central Bank will continue lifting interest rates for months to come.

GBP/USD also rose 0.4% to 1.2073, retaining some strength after surging 1% at the start of the week after Britain struck a post-Brexit Northern Ireland trade deal with the European Union.

However, dollar losses are likely to be limited as economic data has tended to paint a picture of a resilient US economy with sticky inflation, suggesting more Federal Reserve hikes to come.

"This week's key data releases will be the ISM surveys, and in particular Friday's ISM services index, which served as a benchmark for the rapid swings in US growth sentiment over the past two prints," said analysts at ING, in a note.

# FOREX

2023-03-01 16:13:00     Come from : Investing.com

Chinese yuan rises as strong PMI readings lift Asia FX

Chinese yuan rises as strong PMI readings lift Asia FX

By Ambar Warrick

Investing.com -- The Chinese yuan rose sharply on Wednesday as stronger-than-expected business activity data ramped up bets of an economic recovery in the country, helping most other China-exposed currencies gain for the day.

The yuan rose 0.4%, moving further away from its lowest level this year as China’s composite purchasing managers’ index hit its highest level in over a decade, supported by stronger-than-expected growth in both manufacturing and non-manufacturing activity.

The offshore yuan jumped 0.5% against the dollar, as the data indicated that an economic recovery in China gained momentum over the past month after the country relaxed most anti-COVID measures in January.

A recovery in China bodes well for broader Asian economies that trade with the country, with gains in the yuan spilling over into most other regional currencies with high trade exposure to the country.

The Taiwan dollar rose 0.3%, while the South Korean won jumped 0.5% in holiday-thinned trade. The Australian dollar rose 0.3% even as data showed the country’s economic growth slowed drastically in the fourth quarter, amid pressure from elevated inflation and interest rates.

Australian inflation also grew less than expected in January.

The Thai baht led gains across Southeast Asian currencies with a 0.8% bounce, while the Philippine peso added 0.6%.

Still, most Asian currencies were nursing steep losses for February, as concerns over rising U.S. interest rates and a hawkish Federal Reserve persisted. The dollar stuck to a near two-month high against a basket of currencies, after advancing sharply in February.

The dollar index and dollar index futures were muted on Wednesday, after logging small overnight losses on weaker-than-expected economic readings.

Focus this week is largely on U.S. PMI data for February, due on Wednesday and Friday. Any signs of resilience in the U.S. economy give the Fed more economic headroom to keep raising interest rates, which is negative for Asian markets.

Regional economic indicators were also in focus this week. The Japanese yen fell 0.1%, sticking close to its weakest level this year after data showed the country’s manufacturing PMI remained in contraction through February.

The Indian rupee rose 0.1%, as data showed that the country’s economy grew 7% in 2022, much faster than most of its Asian peers. But economic growth for the fourth quarter also slightly missed expectations.

# FOREX

2023-03-01 13:41:00     Come from : Investing.com

Dollar on course for monthly gain; sterling hands back some trade deal gains

Dollar on course for monthly gain; sterling hands back some trade deal gains

By Peter Nurse

Investing.com - The U.S. dollar traded higher in Europe Tuesday, on track to post strong gains this month, while sterling gave back some of its gains from the previous session after the U.K. signed a new post-Brexit trade deal with the European Union.

At 03:05 ET (08:05 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% higher at 104.740 and is on course for a monthly gain of around 3%, its first since September.

The dollar has been on a tear this month as stronger-than-expected economic data, including hot inflation numbers, pointed to the U.S. Federal Reserve raising interest rates further and keeping them high for longer than previously envisaged.

"We have learned that U.S. inflation is proving much stickier and U.S. activity firmer than we were led to believe in December and January," said analysts at ING, in a note. "Understandably, investors are now taking the Federal Reserve hawks more seriously and have priced three more 25bp rate hikes from the Fed in March, May, and June."

Data on housing prices from December is due out later Tuesday, as is reading on consumer confidence. Later this week, investors will get the latest reading on initial jobless claims and services activity.

Elsewhere, GBP/USD fell 0.1% to 1.2045, handing back some of the previous session's around 1% gains after the U.K. and the European Union announced a new deal for post-Brexit trading arrangements for Northern Ireland.

This agreement, if it gets through a deeply divided U.K. parliament, looks set to secure improved relations with Brussels, not to mention the United States, and should make trade smoother for businesses by easing rules.

EUR/USD fell 0.1% to 1.0601, having also risen 0.6% in the previous session, after French consumer prices rose 0.9% on the month in February, an annual rise of 6.2%.

This was more than the expected 0.7% and 6.1%, respectively, and raised the prospect that the overall Eurozone annual figure might come in more than the expected 8.2% in February.

European Central Bank Chief Economist Philip Lane said earlier Tuesday that Eurozone inflation pressures have begun to ease, but added that the central bank will not end rate hikes until it is confident price growth is heading back towards 2%.

These figures suggest that its rate hikes may continue for some time to come.

USD/JPY traded 0.4% higher to 136.75, after data showed Japan's factory output fell 4.6% in January from a month earlier, the fastest decrease since May 2022.

AUD/USD fell 0.3% to 0.6712, NZD/USD dropped 0.4% to 0.6142, while USD/CNY edged lower to 6.9434, ahead of Wednesday's release of China's Purchasing Managers data for February.

This is expected to show that business activity in China's important manufacturing sector improved from the prior month, but remained close to contraction territory.

# FOREX

2023-02-28 16:31:00     Come from : Investing.com

Asia FX muted, dollar rally cools ahead of econ data deluge

Asia FX muted, dollar rally cools ahead of econ data deluge

By Ambar Warrick

Investing.com -- Most Asian currencies moved in a tight range on Tuesday, while the U.S. dollar relinquished some recent gains as markets awaited a barrage of readings this week for more cues on economic growth and monetary policy.

China’s yuan rose 0.2%, faring slightly better than most of its peers following a stronger midpoint fix by the People’s Bank. But the currency was still trading close to the 7 level, a breach of which could bode poorly for the yuan.

Focus this week is on China’s Purchasing Managers’ Index (PMI) for February, which is due on Wednesday. While the data is expected to show that business activity improved from the prior month, China’s vast manufacturing sector is expected to remain close to contraction territory.

The sector is a bellwether for the Chinese economy, and has remained laggard even as the country relaxed most anti-COVID restrictions.

Most China-exposed currencies kept to a tight range on Tuesday, with the South Korean won and the Singapore dollar moving less than 0.1% in either direction.

The dollar steadied against a basket of currencies after logging small losses overnight. The dollar index and dollar index futures rose about 0.1% each on Tuesday.

The two instruments still held close to their highest levels since early-January, amid persistent fears of rising inflation and a hawkish Federal Reserve.

Focus this week is on U.S. PMI data, as well as consumer sentiment and labor market readings for January and the fourth quarter. Any signs of resilience in the U.S. economy give the Fed more economic headroom to keep hiking rates, which is negative for Asian currencies.

Regional units were battered by a sharp rise in U.S. rates in 2022, as the gap between risky and low-risk debt narrowed. This trend is expected to continue in the near-term.

The Australian dollar fell 0.1% on Tuesday, even as data showed the country logged a better-than-expected current account surplus in the December quarter. Focus is now on Australian GDP data for the same period, which is expected to show further cooling in growth on Wednesday.

The Indian rupee fell 0.1% ahead of GDP data for the December quarter due later in the day. While growth is expected to have slowed from the prior quarter, the country is still one of the fastest-growing economies through 2022, helped largely by strong domestic consumption.

The Japanese yen fell 0.1% as data showed industrial production slowed more than expected in January.

# FOREX

2023-02-28 12:55:00     Come from : Investing.com

Sterling holds gains after rising on UK trade deal with EU

Sterling holds gains after rising on UK trade deal with EU

By Rae Wee

SINGAPORE (Reuters) - The pound held steady on Tuesday, retaining gains overnight after Britain struck a new trade deal with the European Union, which brightened the outlook for the post-Brexit UK economy and signalled improved relations between London and the bloc.

The dollar was mostly flat in early trade but was on track to end higher for the month, ending a four-month losing streak.

Britain and the EU on Monday announced a new deal for post-Brexit trading arrangements for Northern Ireland, known as the Windsor Framework, which British Prime Minister Rishi Sunak said would pave the way for a new chapter in London's relationship with Brussels.

Sterling jumped on the back of the news to clock a 1% gain in the previous session, and rose to a high of $1.2069 on Tuesday.

The euro similarly got a lift and was last 0.05% higher at $1.0614, after rising 0.6% on Monday.

The British parliament will now vote on the deal, with the opposition Labour Party saying it will vote in favour.

The leader of Northern Ireland's Democratic Unionist Party (DUP) said his party was working through the details.

"The mood music suggests that this thing will succeed ... there probably is scope for some sort of residual sterling strength here," said Ray Attrill, head of FX strategy at National Australia Bank (OTC:NABZY).

"The real thing is, is this a springboard for a stronger, much improved removal of trade frictions more generally, between the UK and the EU?"

The U.S. dollar index was flat in early trade but headed for a 2.5% monthly gain, its first since last September, as investors ramp up their expectations of how high the Federal Reserve would need to raise rates to tame inflation.

A series of upbeat economic data from the United States released in recent weeks has underscored the resilience of the world's largest economy, strengthening the case for an extended period of Federal Reserve hawkishness. Markets are now expecting the Fed funds rate to peak just above 5.4% by September.

"To be honest, I think we're sort of lurching from one major data print to another," said Attrill. "The next move in the dollar is really a function of how the February data starts to play out in March."

Against the Japanese yen, the dollar steadied at 136.23. Incoming Bank of Japan (BOJ) Governor Kazuo Ueda has thus far offered few clues on whether the BOJ could exit its massive stimulus imminently, although he indicated that he had ideas on such a move.

The kiwi slipped 0.02% to $0.6165, while the Aussie rose 0.13% to $0.6748.

Data released on Tuesday showed that Australia's current account surplus rose sharply in the December quarter, while separate data pointed to a strong rebound in Australian retail sales in January, following a surprise drop in December.

# FOREX

2023-02-28 09:45:00     Come from : Reuters

Dollar edges lower, but remains near highs on inflation concerns

Dollar edges lower, but remains near highs on inflation concerns

By Peter Nurse

Investing.com - The U.S. dollar edged lower in early European trade Monday, but remains elevated as traders price in more interest rate hikes by the Federal Reserve this year in the wake of recent hot inflation data.

At 03:00 ET (08:00 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% lower at 105.105, just below the seven-week high of 105.32 it touched on Friday.

The dollar last week posted its fourth consecutive week of gains and is set to end a four-month losing streak, after the Fed's preferred gauge of inflation, the core personal consumption expenditures price index, rose 0.6% on the month in January, data on Friday showed, higher than the 0.4% expected.

This meant that the annual core rate of PCE inflation ticked up for the first time in four months, to 4.7% - still more than twice the Fed's 2% target.

Consumer prices had also risen more than expected earlier this month, all of which points to the U.S. central bank staying on its hawkish path of raising interest rates further.

"Inflation remains too high, and recent data - including several strong labor market indicators, as well as faster-than-expected retail sales and producer price inflation - all reinforce my view that we have more work to do, to bring inflation down to the 2% target," Boston Federal Reserve President Susan Collins said on Friday.

Rising tensions have added to the dollar's allure, with the U.S. warning China of serious consequences if it provided arms to support Russia's invasion of Ukraine.

"The fear of an escalation in U.S. sanctions may be prompting investors to re-appraise some of their investment holdings along geo-political lines," analysts at ING said, in a note.

Elsewhere, EUR/USD traded 0.1% higher at 1.0555, just above a seven-week low of 1.0533, with the focus on preliminary consumer price data from the main European economies midweek, followed by the Eurozone flash number on Thursday.

Headline Eurozone inflation is expected to ease to 8.2% on an annual basis in February from 8.6% a month earlier. But core inflation, stripping out volatile food and energy prices, could prove more stubborn and could still rise from January's 5.3%.

USD/JPY traded 0.3% lower to 136.08, after the pair had earlier climbed to a two-month high of 136.55 earlier in the session following incoming Bank of Japan governor Kazuo Ueda stating that the merits of the bank's current monetary policy outweigh the costs. This suggested the central bank will remain accommodative for some time to come.

GBP/USD rose 0.2% to 1.1963, AUD/USD fell 0.1% to 0.6715, having earlier fallen to a near two-month low of 0.6705, while USD/CNY rose 0.1% to 6.9638.

The yuan is close to breaching the key 7 to the dollar level on Monday after the People's Bank of China announced its daily midpoint fix for the currency at 6.9572 a dollar, its weakest level since late December.

# FOREX

2023-02-27 16:23:00     Come from : Investing.com

Asia FX falls, dollar nears 2-mth high on hawkish rate hike outlook

Asia FX falls, dollar nears 2-mth high on hawkish rate hike outlook

By Ambar Warrick

Investing.com--Most Asian currencies fell on Monday, while the dollar held near a two-month high after hotter-than-expected U.S. inflation data saw markets pricing in more interest rate hikes by the Federal Reserve this year.

The Chinese yuan fell 0.2% to a near three-month low, also coming under pressure from a substantially weaker daily midpoint fix by the People’s Bank of China. Focus this week is squarely on purchasing managers’ index data for February, which is expected to provide more cues on a potential Chinese economic recovery.

The yuan largely reversed an early-2023 recovery, amid growing doubts over the timing of a Chinese economic rebound this year. While the country relaxed most anti-COVID measures, it is still grappling with a large spike in infections. 

Risk-heavy Southeast Asian currencies were the worst performers for the day, with the Philippine peso losing 1.2%, while the Malaysian ringgit lost 0.9%.

The Japanese yen rose 0.1%, but was trading near its weakest level against the dollar since mid-December. The currency was also dented by incoming Bank of Japan Governor Kazuo Ueda stating that the bank’s ultra-loose policy will continue in the near-term. 

The dollar steadied against a basket of currencies on Monday, with the dollar index and dollar index futures hovering near a two-month high. Personal consumption expenditures data- the Fed’s preferred inflation gauge- showed on Friday that U.S. inflation remained stubborn through January, giving the central bank more impetus to keep raising interest rates.

The reading boosted the dollar, and triggered outflows from most Asian currencies on Monday. 

U.S. Treasury yields also broadly advanced after the inflation reading, which added to the pressure on regional units.

A resurgence in bets on  a more hawkish Fed has battered Asian currencies in recent weeks, given that rising U.S. interest rates will narrow the gap between risky and low-risk debt. Regional units were battered by this trade in 2022, and are likely due for more near-term pressure. 

Focus this week is also on U.S. nonfarm payrolls data for January, due on Friday. Any signs of strength in the jobs market gives the Fed more headroom to keep hiking rates.

# FOREX

2023-02-27 12:37:00     Come from : Investing.com

Chinese yuan approaches 7 level as PBOC slashes midpoint rate

Chinese yuan approaches 7 level as PBOC slashes midpoint rate

By Ambar Warrick

Investing.com-- China’s yuan came close to breaching the key 7 to the dollar level on Monday after the People’s Bank of China slashed its daily midpoint fix for the currency, while pressure from a strong dollar and rising Treasury yields also weighed.

The PBOC set its daily yuan midpoint at 6.9572 a dollar on Monday, compared to Friday’s fix of 6.8942. Monday’s fix was also at its weakest level since late-December.

The yuan was last trading down 0.2% at 6.9677 against the dollar- its weakest level in nearly three months.

The PBOC’s weak fix comes on the heels of a hotter-than-expected U.S. inflation report, which saw the dollar surge to a seven-week high against a basket of currencies on Friday. The report also triggered a broad spike in U.S. Treasury yields. 

Strong U.S. inflation is expected to give the Federal Reserve more economic headroom to keep raising interest rates. This heralds more pressure on the yuan, as the gap between Chinese and U.S. rates widens further in the dollar’s favor. 

Optimism over easing U.S. inflation and a post-COVID Chinese economic recovery had helped the yuan recover from the 7 level in early-December. But that trade appears to be unwinding amid renewed fears of rising U.S. rates.

Focus this week is also on China’s purchasing managers’ index for February, which is expected to show a somewhat mixed economic recovery. While service sector activity is set to grow further, the manufacturing sector is still expected to remain in contraction, as seen in January.

This somewhat mixed recovery in China has also weighed on sentiment, given that traders were pricing in a swift economic rebound in the country after it relaxed most anti-COVID measures earlier this year. 

Chinese inflation has also remained languid despite the reopening, giving the PBOC little room to hike interest rates. The bank is struggling to maintain a balance between fostering economic growth and curbing further weakness in the yuan. 

Chinese lending rates are currently at historic lows, keeping the yuan’s appeal limited.

# FOREX

2023-02-27 11:47:00     Come from : Investing.com