Dollar up after strong US jobs data, takes back some losses from yen

WASHINGTON, Dec 8 – The dollar rose on Friday after new data showed US job growth accelerated in November and the unemployment rate dropped, pointing to underlying strength in the labor market.

The US dollar index was last up 0.3% at 104.0, on track for a modest weekly gain after a bruising November, in which it shed 3%. The yen was 0.52% lower against the dollar at 144.35, following its biggest rally in almost a year the day before.

US nonfarm payrolls added 199,000 jobs last month, the Labor Department’s Bureau of Labor Statistics said on Friday. Economists polled by Reuters had forecast 180,000 jobs created.

The employment report, which showed the unemployment rate fell to 3.7%, suggested that financial market expectations that the US Federal Reserve could pivot to cutting interest rates as soon as the first quarter of 2024 were premature.

“So far, there’s nothing in the data that forces (the Fed) off their ‘let’s see what happens’ stance. The market was clearly leaning in the other direction,” said Steven Englander, head of global G10 FX research at Standard Chartered Bank in New York.

Traders of short-term US interest-rate futures on Friday pared bets the Fed will start cutting interest rates in March after the report, and now see a May start to rate cuts more likely.

Markets had earlier priced in about a 60% chance of a March start to Fed rate cuts but, after the readout, pared that to just under 50%.

“In the short term, the US rates market has just gotten, I think, way too dovish on the Fed,” said Stephen Miran, co-founder of Amberwave Partners. “The massive ease in financial conditions since the start of November basically means that the Fed doesn’t need to cut to throw fuel on that fire.”

YEN ENTHUSIASM

Although the yen was lower after the readout of the US November jobs data, it surged by as much as 1.2% earlier on, adding to Thursday’s 2% rally after Bank of Japan (BOJ) Governor Kazuo Ueda gave the clearest steer yet that the central bank is considering when to wrap up its negative rates policy. It was headed for its fourth weekly gain against the dollar on Friday.

The Japanese currency has vaulted to multi-month highs against a range of others in the last two days, although some of that strength dissipated over Friday’s European trading session.

Thursday’s rally was the largest one-day jump for the yen since January. But without more impetus from the BOJ, it may not have much more scope for outsized gains.

“I think it’s pretty clear the BOJ is where other central banks were in late 2021. The case for having the lowest real interest rates in the world … is not very strong at this point. But the question is, how long do they want to prepare the market?” said Englander.

The yen has fared best against higher-yielding currencies, such as the pound. Sterling fell to a two-month low against the yen on Friday, but last recovered to rise 0.66% to 181.88.

Elsewhere, the euro fell 0.31% to USD 1.07585, while the pound dropped 0.38% to USD 1.255, and was set for a weekly decline.

The Australian dollar fell 0.32% to USD 0.65795, while the Chinese yuan weakened 0.27% to 7.1877 against the dollar in offshore trading.

Data on Thursday showed China’s exports grew for the first time in six months in November, while imports shrank.

In cryptocurrencies, bitcoin last rose 1.58% to 43,981, hovering near its highest since April 2022.

(Reporting by Hannah Lang in Washington; Additional reporting by Amanda Cooper in London and Rae Wee in Singapore; Editing by Mark Potter, Susan Fenton, and Jonathan Oatis)

Gold slides over 1% as strong US jobs data clouds rate cut bets

Dec 8 – Gold retreated back under USD 2,000 an ounce on Friday as the dollar and Treasury yields strengthened after traders trimmed bets for US interest rate cuts to materialize by March following stronger-than-expected jobs data.

Spot gold fell 1.4% to USD 2,000.49 per ounce by 2:15 p.m. ET (1915 GMT) after hitting a session low of USD 1,994.49 earlier. Prices were down 3.4% so far for their worst week in ten.

US gold futures settled 1.6% lower at USD 2,014.50.

US job growth accelerated in November while the unemployment rate fell to 3.7%, signaling underlying labor market strength that made traders bet that it could take the Federal Reserve until May to deliver the first reduction in a series of interest-rate cuts next year.

“Gold has slumped as the US employment report showed strength across the board,” said Tai Wong, a New York-based independent metals trader.

“This close at lows, USD 150 below Sunday’s all-time high, has shifted the narrative on the Fed meeting. Now, gold bulls are hoping for a friendly Fed result that will prevent a deeper correction, if not a rout.”

The dollar index firmed 0.7% for the week, making bullion more expensive for overseas buyers, while 10-year Treasury yields rebounded from three-month lows.

Traders awaited up-to-date interest rate projections for next year from the Fed policy meeting on Dec. 12-13.

“With a great deal of easing already priced into the market, both silver and gold will continue to see periods where convictions could be challenged,” Ole Hansen, Saxo Bank’s head of commodity strategy, said in a weekly note.

Physical gold dealers in India increased discounts to seven-month highs this week to lure customers as record local prices hurt demand.

Spot silver lost 3.3% to USD 23.00 per ounce, eyeing its worst week since October 2022.

Platinum gained 1.3% to USD 919.01, while palladium fell 2.44% to USD 945.94. Both were set for weekly declines.

(Reporting by Anushree Mukherjee, Ashitha Shivaprasad, and Deep Vakil in Bengaluru; Editing by Shilpi Majumdar and Maju Samuel)

Global bond funds draw biggest weekly inflow in eight months

Dec 8 – Global bond funds saw significant inflows in the seven days to Dec. 6, amid growing expectations of interest rate cuts in the US and Europe and signs of inflation waning.

Investors purchased a net USD 11.57 billion of global bond funds during the period, the most substantial weekly net buying since April 5.

Following US Federal Reserve Chair Jerome Powell’s cautious remarks on interest rate increases, US bond prices rallied, driving the 10-year Treasury yield which to a three-month low of 4.104% during the week.

European bond funds notably drew USD 11.03 billion, the highest since April 2021, while Asian funds gained USD 1.33 billion. US funds experienced USD 2.56 billion in net outflows.

Global high yield bond funds attracted USD 2.38 billion, but government bond funds saw USD 1.22 billion in outflows.

Meanwhile, demand for equity funds cooled as they received just USD 1.62 billion, the lowest weekly inflow in five weeks.

Financial sector equity funds still attracted USD 897 million, their biggest weekly inflow since July 19. Communication services also saw inflows of USD 518 million, while the healthcare sector experienced outflows of USD 414 million.

Meanwhile, global money market funds saw substantial demand as they accumulated some USD 83.71 billion, a seventh straight week of inflows.

Elsewhere, data for commodity funds revealed that energy funds had USD 121 million of net buying, the second weekly inflow in a row. Precious metal funds also witnessed USD 101 million worth of net buying, after net selling of USD 469 million previously.

Data covering 29,159 emerging markets funds showed investors stayed net sellers of equity funds for a 17th consecutive week, shedding a net USD 1.96 billion. EM bond funds, however, received USD 1.57 billion of inflows, after USD 761 million of outflows a week ago.

(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; Editing by Alexander Smith)

Oil gains over 2% but records seventh weekly decline

BENGALURU, Dec 8 – Oil prices rose more than 2% on Friday after US data supported expectations of demand growth, but both benchmarks fell for a seventh straight week, their longest streak of weekly declines in half a decade, on lingering oversupply concerns.

Brent crude futures settled at USD 75.84 a barrel, up USD 1.79, or 2.4%, while US West Texas Intermediate crude futures settled at USD 71.23, up USD 1.89, or 2.7%.

For the week, both benchmarks lost 3.8%, after hitting their lowest since late June on Thursday, a sign that many traders believe the market is oversupplied.

Also fuelling the market’s downturn, Chinese customs data showed its crude oil imports in November fell 9% from a year earlier as high inventory levels, weak economic indicators and slowing orders from independent refiners weakened demand.

However, Friday’s gains, the first in six sessions, could be a sign that the market has found a floor for now after falling for six straight sessions, said Phil Flynn, analyst at Price Futures Group.

“Look to step in with caution but the lows should be in,” he said.

US Labor Department data released showed stronger-than-expected job growth, signs of underlying labor market strength that should support fuel demand in the biggest oil market.

That followed government data on Wednesday showing US gasoline demand last week lagged the 10-year seasonal average by 2.5% and gasoline stocks rose by 5.4 million barrels, more than quintuple forecasts, leading to gasoline prices to plummet.

Like crude, US RBOB gasoline futures on Friday rebounded about 3% from two-year lows on Thursday.

“Wednesday’s Energy Information Administration (EIA) report which spurred concern of soft demand on a significant increase in gasoline inventories, may not be as concerning in the wake of the strong jobs report,” said Rob Haworth, senior investment strategy director at US Bank Asset Management.

Offering more support to the demand enthusiasm, data showed US consumer sentiment perked up much more than expected in December.

Meanwhile, Saudi Arabia and Russia, the world’s two biggest oil exporters, on Thursday called for all OPEC+ members to join an agreement on output cuts just days after a fractious meeting of the producers’ club.

The Organization of the Petroleum Exporting Countries and its allies last week agreed to a combined 2.2 million barrels per day (bpd) in output cuts for the first quarter of next year. The market has been concerned, however, that some members may not adhere to their commitments.

(Reporting by Shariq Khan, Paul Carsten, Stephanie Kelly, and Muyu Xu; Editing by Marguerita Choy and Cynthia Osterman)

Stocks sag as China worries, Hong Kong downgrade looms

Dec 7 – Shares in most emerging markets dropped on Thursday led by Chinese stocks, after trade data failed to instil confidence about recovery in the world’s second-largest economy, while a Moody’s downgrade on Hong Kong further added to the gloom.

Heavy-weight China blue-chips closed 0.2% lower after data showed exports grew for the first time in six months in November, while imports unexpectedly fell following the previous month’s increase.

“Today’s trade data add to signs of stabilization of China’s economy. However, both external and domestic demand has nevertheless remained soft, in line with the mixed signals given by the latest PMI readings,” said Tommy Wu, senior economist at Commerzbank Research.

Hong Kong listed equities tumbled 0.7% to a 13-month low after Moody’s put Hong Kong, Macau and swathes of China’s state-owned firms and banks on downgrade warnings, after an identical move on Wednesday on the mainland government’s ratings.

MSCI’s index tracking developing markets equities lost 0.5%, while a basket of currencies dipped 0.1% against the dollar as of 0913 GMT.

The indices have been range-bound following November’s rally, as investors await U.S. November non-farm payrolls data that could determine the outlook for the world’s largest economy and U.S. monetary policy.

India’s benchmark NSE Nifty 50 stock index dipped 0.1% after rising for seven consecutive sessions and hitting record highs.

In central and eastern Europe, Poland’s zloty fell 0.2% against the euro, a day after the local central bank left its main interest rate on hold at 5.75%.

Czech’s crown rose 0.2% as data showed industrial output rose by a higher-than-expected 1.9% in October, after a revised 4.9% fall in September.

Turkey’s BIST 100 stock index shed 0.3%, with the banking index tanking 3.1%. The Turkish Banking Association (TBB) and Central Bank Governor Hafize Gaye Erkan evaluated the transition to lira and moves to reduce the amount of forex-protected KKM deposits converted from foreign currency.

Russia’s rouble strengthened to 92.54 to the dollar. The local parliament voted to set March 17, 2024 as the date for presidential elections, with residents of the parts of Ukraine annexed by Russia to participate for the first time.

In Latin America, Presidents of the four Mercosur nations meet for their annual summit in Rio de Janeiro with black clouds hovering over the fate of a trade deal with the European Union, as well as the future of the regional common market itself.

(Reporting by Johann M Cherian in Bengaluru; Editing by Rashmi Aich)

Euro zone bond yields trade near seven-month lows before US jobs data

LONDON, Dec 7 – Euro zone bond yields were little changed on Thursday after hitting multi-month lows the previous day, as investors waited for impetus from U.S. jobs data.

Germany’s 10-year bond yield was last down less than 1 basis point (bp) at 2.205%, just above its lowest level in seven months.

Bond yields, which move inversely to prices, have tumbled this week after influential European Central Bank official Isabel Schnabel told Reuters that further interest rate hikes were “rather unlikely” given that inflation slowed to 2.4% in November.

Italy’s 10-year bond yield was last up unchanged at 3.957% after falling to 3.95% on Wednesday, the lowest since July.

The US employment report on Friday will give investors a sense of whether their expectations for steep Federal Reserve interest rate cuts next year are appropriate. Before that, US weekly jobless claims data is due at 1330 GMT on Thursday.

Pricing in money markets shows that investors currently expect around 120 bps of rate cuts in the U.S. and 140 bps in the euro zone by December next year.

Sonja Laud, chief investment officer at Legal & General Investment Management, said at an event on Wednesday that she expects euro zone inflation to remain above the ECB’s 2% target by the end of 2024.

“If we’re right on that, clearly we might not see the full extent of the rate cuts,” she said.

Yet she said it has historically paid off to buy bonds when central banks have finished hiking interest rates.

“This journey might not be straightforward, but if you accept (that and) you got in here at the top, then you might well be in for a very profitable journey.”

Germany’s 2-year bond yield, which is sensitive to ECB rate expectations, was last down 1 bp at 2.596% after falling to its lowest since May at 2.57% on Wednesday.

Global bond yields rose in the Asian session overnight, with Deutsche Bank credit strategist Jim Reid pointing to comments from Bank of Japan officials that pushed up Japanese market rates.

BoJ Deputy Governor Ryozo Himino said on Wednesday that an exit from ultra-loose monetary policy, if done properly, could reap rewards for the country’s economy.

Japan’s 10-year bond yield rose around 11 bps overnight and last stood at 0.756%.

Japanese investors are large holders of foreign bonds and some analysts have said a sharp rise in domestic yields could suck money back to Japan and out of global assets.

Mixed economic data on Thursday showed that German industrial output unexpectedly fell for a fifth month in a row in October, while Chinese exports grew for the first time in six months.

(Reporting by Harry Robertson; Editing by Angus MacSwan)

Gold firms as spotlight shifts to US jobs print

Dec 6 – Gold firmed on Wednesday as Treasury yields eased, stabilizing after a rapid retreat from a record high hit earlier this week, while investors braced for the US jobs report for further clues on how soon interest rate cuts may materialize.

Spot gold rose 0.4% to USD 2,027.48 per ounce by 3:10 p.m. ET (2010 GMT). US gold futures settled 0.6% higher at USD 2,047.90.

Benchmark 10-year Treasury yields hit a more than three-month low.

Gold scaled an all-time peak of USD 2,135.40 on Monday on elevated bets for a Fed cut, before dropping more than USD 100 on uncertainty over the timing of the reductions.

Further direction could come from the US non-farm payrolls data due on Friday, coming ahead of the US central bank’s policy meeting next week.

“Gold and silver traders are sitting on a tinderbox, and this payroll Friday could spark the flames … While we expect macro headwinds to weigh on precious metals short positions in the medium term, the current set-up is ripe for a squeeze,” analysts at TD Securities said in a note.

Traders are pricing in about a 60% chance of a rate cut by March next year, CME’s FedWatch Tool showed.

Safe-haven inflows driven by wars in Ukraine and the Middle East, coupled with the rate cut bets, have driven a more than 10% rise in bullion prices. Lower interest rates make zero-yield gold more attractive than competing assets such as bonds and the dollar.

Anticipation of monetary easing is the biggest driver of gold now and prices should move higher into next year, said Daniel Pavilonis, senior market strategist at RJO Futures.

“Geopolitics can play an important role in moving gold up, for the remainder of this year and next year.”

Silver fell 0.9% to USD 23.92 per ounce, while platinum dropped 1% to USD 890.35, both down for a third straight session.

Palladium climbed 1.3% to USD 946.31, snapping a six-session losing streak from last session’s five-year low.

(Reporting by Anushree Mukherjee in Bengaluru; Editing by Maju Samuel)

Dollar at 2-week high, euro softer as market bets on rate cuts

WASHINGTON, Dec 6 – The US dollar was at a two-week high on Wednesday, while the euro was weak across the board as markets ramped up bets that the European Central Bank (ECB) will cut interest rates as early as March.

Although markets are still pricing at least 125 basis points of interest rate cuts from the US Federal Reserve next year, the dollar was able to hold steady as rate cut bets for other central banks intensified.

The dollar index, which measures the currency against six other majors, was last up 0.19% at 104.16. The euro was down 0.29% to USD 1.0764.

Traders are betting that there is around an 85% chance that the ECB cuts interest rates at the March meeting, with almost 150 basis points worth of cuts priced by the end of next year. Influential ECB policymaker Isabel Schnabel on Tuesday told Reuters that further interest rate hikes could be taken off the table given a “remarkable” fall in inflation.

The euro also touched a three-month low against the pound, a five-week low versus the yen, and a 6-1/2 week low against the Swiss franc.

“It’s a reasonably sized sell-off and the market is trying to digest, is it just a correction? Did the market get over-exuberant in the previous weeks? I think there is definitely an element of that,” said Amo Sahota, director at FX consulting firm Klarity FX in San Francisco.

‘A BIT OVERBOARD’

The ECB will set interest rates on Thursday next week and is all but certain to leave them at the current record high of 4%. The Fed and Bank of England are also likely to hold rates steady next Wednesday and Thursday respectively.

The Bank of Canada on Wednesday held its key overnight rate at 5% and, in contrast to its peers, left the door open to another hike, saying it was still concerned about inflation.

Traders have priced around a 60% chance of the US central bank cutting rates in March, according to CME’s FedWatch tool.

“Markets have aggressively priced in rate cuts, without any kind of confirmation from central banks,” said Adam Button, chief currency analyst at ForexLive in Toronto. “As December continues, we need either a change in tune from central bankers or a repricing in markets.”

If the Fed were to cut rates as markets expect, it could result in the dollar loosening its grip on other G10 currencies next year, dimming the outlook for the greenback, according to a Reuters poll of foreign exchange strategists.

The spotlight in Asia was on China, as markets grappled with rating agency Moody’s cut to the Asian giant’s credit outlook.

The offshore Chinese yuan was flat at USD 7.1728 per dollar, a day after Moody’s cut China’s credit outlook to “negative”.

China’s major state-owned banks stepped up US dollar selling forcefully after the Moody’s statement on Tuesday, and they continued to sell the greenback on Wednesday morning, Reuters reported.

Elsewhere in Asia, the Japanese yen weakened 0.15% versus the greenback at 147.38 per dollar. The Australian dollar fell 0.02% to USD 0.65495.

In cryptocurrencies, bitcoin eased 0.06% to USD 44,049, still near its highest since April 2022.

The world’s largest cryptocurrency has gained 150% this year, fueled in part by optimism that a US regulator will soon approve exchange-traded spot bitcoin funds (ETFs).

(Reporting by Hannah Lang in Washington; additional reporting by Samuel Indyk in London and Ankur Banerjee in Singapore; Editing by Christina Fincher, Mark Potter, and Diane Craft)

Oil falls 4% as build in gasoline stocks fuel demand concerns

HOUSTON, Dec 6 – Oil prices fell nearly 4% on Wednesday to their lowest settlements since June, as worries about global fuel demand mounted after US data showed a larger-than-expected rise in gasoline inventories.

Brent crude futures settled down USD 2.90, or 3.8%, at USD 74.30 a barrel. US WTI crude futures fell by USD 2.94, or 4.1%, to USD 69.38 a barrel.

“There is demand destruction coming in from the fuel side,” said Dennis Kissler, senior vice president of trading at BOK Financial.

“The market is more demand focused than supply focused right now.”

Concerns over China’s economic health and future fuel demand also weighed on prices, a day after rating agency Moody’s lowered the outlook on China’s A1 rating to negative from stable.

US gasoline stocks rose by 5.4 million barrels last week, the Energy Information Administration said, more than quintuple the 1 million-barrel rise that analysts had expected. US gasoline futures RBc1 plummeted to their lowest in two years.

“Even though it was not the peak gasoline season, demand during the long Thanksgiving holiday weekend was lackluster,” said John Kilduff, partner with Again Capital LLC.

Gasoline demand last week lagged the 10-year seasonal average by 2.5%.

The US dollar also touched a two-week high, which pressures demand by making oil more expensive for holders of other currencies.

An unexpected fall in US crude inventories did little to support prices. Crude inventories fell by 4.6 million barrels, far exceeding the 1.4 million-barrel drop analysts had expected. EIA/S

OPEC+, the Organization of the Petroleum Exporting Countries and allies such as Russia agreed late last week on voluntary output cuts of about 2.2 million barrels per day (bpd) for the first quarter of 2024.

This week, Saudi and Russian officials said the cuts should prevent a buildup in oil inventories in the first quarter and could be extended or deepened.

Despite the OPEC+ supply curbs, prices have slipped nearly 11% since the settlement on Nov. 29, the day before OPEC+ met.

On Wednesday, Russian President Vladimir Putin traveled to the United Arab Emirates and Saudi Arabia to meet with the UAE’s President Sheikh Mohammed Bin Zayed Al Nahyan, and Saudi Crown Prince Mohammed bin Salman. Oil and OPEC+ were on the agenda.

Forward prices for US crude were at their steepest premium to prompt barrels, a sign of ample supply and growing fears of slow demand.

(Reporting by Arathy Somasekhar and Georgina McCartney in Houston, Robert Harvey in London, Andrew Hayley in Beijing, and Trixie Yap in Singapore, Editing by Louise Heavens, Elaine Hardcastle, Simon Webb, and David Gregorio)

Dollar’s dominant grip on FX markets to loosen further

BENGALURU, Dec 6 – The dollar will loosen its grip on other G10 currencies in 2024, with a dimmer outlook for the currency as the US Federal Reserve was expected to start cutting interest rates next year, a Reuters poll of FX strategists found.

Dominating currency markets since mid-2021, the dollar stayed relatively strong for the better part of this year but lost momentum after a few Fed officials made dovish comments last week.

Erasing all of its yearly gains, the dollar index fell 3.0% in November, its biggest monthly drop in a year.

Much of the greenback’s strength was down to the US economy’s superior performance compared to its peers. The world’s largest economy expanded at an annualized rate of 5.2% last quarter, the fastest pace since Q4 2021.

While analysts expected the currency’s weakening trend to continue into next year, median predictions in the Dec. 1-5 Reuters poll of 71 analysts showed a majority of the falls coming in the later part of 2024.

“We are looking for the dollar to weaken further next year, but we think the weakness will be more in the second half of next year,” said Lee Hardman, senior currency strategist at MUFG.

“In the first half of the year, we’re still relatively cautious about predicting a bigger dollar sell-off because we think the global growth story outside of the US still remains very, very weak and challenging.”

While predictions showed the dollar will remain resilient in the first six months of 2024, there was no clear consensus on what will drive the currency’s performance.

Among analysts who answered an additional question, 20 of 47 said interest rate differentials, 17 said economic data and seven said safe-haven demand. The remaining three gave varied reasons.

“We are at that turning point in the global economy and central bank policy that maybe it is creating more uncertainty over what’s going to be the key drivers for FX markets over the next six months,” added MUFG’s Hardman.

But beyond that time period, economic growth and currency valuations were likely to dictate currency moves.

“From Q2 onwards … we do think cyclical conditions globally will begin to improve and that should lead to markets moving away from being driven primarily by rate dynamics and move towards cyclical dynamics and valuations where the likes of EUR/USD and USD/CAD will all of a sudden look cheap on that basis,” said Simon Harvey, head of FX analysis at Monex Europe.

The euro EUR=, which is up 1.0% for the year was expected to end December at USD 1.08, around the same level it was seen trading on Tuesday.

It was then forecast to change hands at USD 1.09, USD 1.10 and USD 1.12 in three, six and 12 months gaining 0.4%, 1.5% and 3.6% respectively.

The Japanese yen, the worst performing major currency this year, has lost about a third of its value in the past three years and was expected to gain 7.4% to trade at 137/dollar in a year.

Sterling, already up over 4.0% for the year was predicted to gain 1.7% to USD 1.28 in a year.

(Reporting by Hari Kishan; Polling by Prerana Bhat, Pranoy Krishna, and Anant Chandak:
Editing by Nick Zieminski)

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