Dollar posts steep weekly fall, trades below 150 yen

NEW YORK/LONDON, Nov 17 – The dollar posted its second-steepest weekly decline versus other major currencies this year on Friday, while the yen strengthened sharply, and the dollar traded below 150 yen, as concerns grow about the weakening global economic outlook.

Cooler-than-expected US inflation data on Tuesday and Wednesday hastened market expectations for how soon the Federal Reserve will cut rates. Such a move would weaken a major dollar support and could come as early as next year’s first quarter.

The dollar index, which measures the greenback against six other major currencies, slid to lows last seen on Sept. 1, while the yield on benchmark 10-year Treasury notes fell to a two-month low of 4.379%.

Data that showed US single-family homebuilding increased marginally in October briefly supported the dollar, but with inflation the main market driver it remained lower on the day.

“The spate of recent data points towards progress being made on the inflation front,” said Bipan Rai, North America head of FX strategy at CIBC Capital Markets in Toronto. “It really feels like the initial momentum now is for the dollar to move lower.”

The dollar index fell 0.49% on the day, hitting a low of 103.85 that increased the greenback’s decline over the past five days to almost 1.8% – its biggest weekly drop since mid-July.

“Everything is pointing towards a fourth-quarter slowdown in the United States,” said Thierry Wizman, global FX and interest rate strategist at Macquarie in New York, adding that a key signal would be companies guiding growth expectations lower.

“They’re not seeing the pricing power they saw in Q3 and they’re not seeing the kind of enthusiasm on the part of customers that they were seeing in Q3 either,” Wizman said.

The euro rose 0.52% to USD 1.0906 after Eurostat data confirmed year-on-year inflation in the eurozone slowed sharply in October.

The yen – punished broadly this year by dollar strength – broke the 150 mark for the first time in nearly two weeks, gaining 0.69% to 149.68 to the dollar. The US currency is down about 1.4% versus the Japanese currency since Monday.

Japanese authorities do not have specific exchange-rate levels in mind when deciding when to intervene in the currency market, Deputy Finance Minister Ryosei Akazawa told parliament on Friday.

The yen’s strength reflected the fact that “contracting growth concerns are rising” globally, said Lee Hardman, currency analyst at MUFG, adding that Japanese terms of trade were less impacted by falling energy prices.

Weaker-than-expected retail sales figures in Britain added to a slew of negative readings this week, but sterling nudged higher to USD 1.2458, up 0.42% on the day.

Sluggish data globally has raised concerns about economic prospects, but also suggests central banks may be winning in their fight against soaring prices.

Futures markets are pricing 93 basis points (bps) of cuts in the Fed’s overnight lending rate by December 2024, market bets that have contributed to dollar weakness.

Money markets have also nearly fully priced 100 bps of rate cuts in the eurozone next year. Nonetheless, European Central Bank (ECB) policymakers Robert Holzmann and Joachim Nagel said on Friday the bloc must stand ready to raise interest rates again if necessary.

ECB President Christine Lagarde said earlier in the day that the EU needs a capital markets union, adding that neither heavily indebted governments nor banks can come up with the money needed to make the bloc more productive and independent.

(Reporting by Herbert Lash in New York; Additional reporting by Iain Withers in London and Rae Wee and Tom Westbrook in Singapore; Editing by Alexander Smith and Matthew Lewis)

Gold set for best week in four on Fed pause bets

Nov 17 – Gold prices held steady on Friday but headed for their biggest weekly gain in four as the dollar and Treasury yields weakened amid growing expectations that the US Federal Reserve is done with its monetary policy tightening.

Spot gold was steady at USD 1,980.20 per ounce by 2:45 p.m. ET (1945 GMT) after rising to a two-week high earlier in the session. Prices were up about 2.2% so far this week.

US gold futures settled down 0.1% at USD 1,984.70.

“There is a strong potential for gold to continue to rally a bit more but prices have to move a bit lower, before the next leg-up in the rally and perhaps test the USD 2,000 level at the same time,” said Everett Millman, chief market analyst at Gainesville Coins.

“Data that came out this week cemented the fact that the Fed is likely done with rate hikes, helping gold. Gold’s move will depend on incoming data and market response to the data.”

This week’s data revealed the US consumer price index was unchanged in October and another set of data highlighted that the number of Americans filing new claims for unemployment benefits increased more than expected last week.

The market is now pricing in interest rate cuts as early as May next year after data pointed to slowing inflation.

Lower interest rates exert downward pressure on the dollar and bond yields, enhancing the appeal of non-yielding bullion.

The dollar was on track for a steep weekly drop, while the 10-year Treasury yield also fell.

On the physical front, Indian buyers brushed off record-high local prices this week making gold purchases during the Diwali festival week in the country.

Spot silver fell 0.1% to USD 23.72 per ounce, while platinum rose 0.4% to USD 895.95. Both were up 6.7% so far this week.

Palladium gained 1.4% to USD 1,052.56 per ounce and headed for its best week in over a year.

(Reporting by Anushree Mukherjee and Ashitha Shivaprasad in Bengaluru; Editing by Jane Merriman and Shounak Dasgupta)

Global equity funds see surge in inflows on Fed pause hopes

Nov 17 – Global equity funds saw significant inflows in the week ending Nov. 15, buoyed by investor hopes that cooler-than-expected US inflation would prompt the Federal Reserve to pause interest rate hikes.

The MSCI World Equity Index hit a two-month peak of 686.32 this week, propelled by US data on Tuesday indicating that consumer prices in October remained steady, defying expectations of a 0.1% increase. The core Consumer Price Index (CPI), rising only 0.2%, also fell short of the anticipated 0.3% hike.

Investors pumped in a net USD 11.48 billion into global equity funds during the week, marking the biggest weekly net purchase since June 14, LSEG data showed.

US equity funds alone attracted USD 9.33 billion, a significant rise from the USD 1.84 billion in net purchases a week earlier. European and Asian equity funds also saw inflows, attracting USD 1.24 billion and USD 431 million, respectively.

The technology sector, in particular, witnessed a notable surge in interest, with a net USD 2.15 billion poured into the sector — the highest since Dec. 15, 2021.

Gold, precious metals, and communication services sectors attracted USD 534 million and USD 237 million, respectively.

Global bond funds continued to attract capital, with approximately USD 3.5 billion channeled into them, marking the second consecutive week of net buying. High-yield bond funds recorded net purchases of around USD 5.01 billion, building on the previous week’s USD 6.43 billion inflow.

However, government bond funds saw a drastic reduction in inflows, receiving only USD 140 million, a 95% decrease from the USD 2.77 billion net buying in the week prior.

In the commodities market, energy funds remained popular for the fourth week in a row, securing about USD 77 million in inflows. Precious metal funds experienced modest inflows of USD 53 million, the smallest in three weeks.

Emerging market (EM) data, encompassing 29,658 funds, highlighted a net sell-off of USD 1.3 billion in EM bond funds during the week, a stark contrast to the USD 745 million net purchases seen a week earlier. EM equity funds continued to face headwinds, with a net USD 554 million exiting in a 14th consecutive week of outflows.

(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; Editing by Kim Coghill)

Foreigners sell Asian bonds for third month on US yield rise, Middle East tensions

Nov 17 – Foreign investors continued to retreat from Asian bonds for the third consecutive month in October, driven by a rise in US Treasury yields and heightened geopolitical tensions in the Middle East.

According to data from regional regulatory authorities and bond market associations, foreigners offloaded a net total of USD 761 million in bonds from Malaysia, Indonesia, South Korea, India, and Thailand. This outflow follows approximately USD 3.58 billion in net sales the previous month.

Indonesian bonds bore the brunt, with foreign net selling reaching USD 800 million, albeit a 47% decrease from the USD 1.5 billion in disposals seen a month earlier.

Malaysian and South Korean bonds also faced selloffs, with investors pulling out USD 538 million and USD 515 million, respectively.

Conversely, Indian bonds bucked the trend, attracting about USD 767 million from overseas investors, the seventh consecutive month of net inflows. Thai bonds also experienced a resurgence, receiving net cross-border inflows of USD 325 million after two months of consecutive outflows.

“The main driver was higher US bond yields which threatened to break above 5%, with a brief period of geopolitical risk aversion due to the Israel-Hamas war,” said Khoon Goh, head of Asia Research at ANZ.

US Treasury yields have, however, retreated this month, and hovered near two-month lows on Thursday after weekly jobless claims rose more than expected, helping cement expectations the Federal Reserve will not feel pressure to raise interest rates again to slow inflation.

“If US Treasury yields are capped, with US 10y appearing to face difficulty in sustaining a move above 5%, it would provide much-needed relief for EM Asia assets,” said Mitul Kotecha, an EM strategist at Barclays in a note.

(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; Editing by Kim Coghill)

Oil jumps 4% after week-long selloff, but falls for a fourth week

NEW YORK, Nov 17 – Oil prices jumped more than 4% on Friday, rebounding from a four-month low hit in the previous session, as investors who had taken short positions took profits and while US sanctions on some Russian oil shippers lent support.

Brent crude futures settled up USD 3.19, or about 4.1%, at USD 80.61 a barrel, while West Texas Intermediate crude (WTI) rose USD 2.99, or 4.1%, at USD 75.89.

“You’re getting a natural profit-taking rebound and short covering, to a degree,” said John Kilduff, partner at Again Capital LLC in New York.

Some of the losses were offset after the US imposed sanctions this week on maritime companies and vessels for shipping Russian oil sold above the Group of Seven’s price cap.

Still, both benchmarks ended the week more than 1% lower, their fourth straight weekly decline, mostly weighed down by a rise in US crude inventories and sustained record-high production.

China’s deepening property crisis and slowing industrial growth also weighed.

“Demand growth from China has been falling short of expectations,” said Andrew Lipow, president of Lipow Oil Associates.

US oil producers have been cutting the number of active drilling rigs for nearly a year due to weaker prices. The oil rig count, however, this week rose by six, the most since February, energy services firm Baker Hughes said.

“When you have a sharp drop in price, the producers think twice about moving ahead with capital spending and projects,” said Phil Flynn, an analyst at Price Futures Group.

Some analysts said Thursday’s sharp selloff may have been overdone, particularly in light of escalating tensions in the Middle East that could disrupt oil supplies and the US vowing to enforce sanctions against Hamas-backer Iran.

With Brent below USD 80, many analysts expect OPEC+, principally Saudi Arabia and Russia, to extend output cuts into 2024.

The OPEC+ group, comprising of the Organization of the Petroleum Exporting Countries and its allies, is set to consider whether to make additional oil supply cuts when the group meets later this month, three sources told Reuters.

“Oil prices are down slightly this year despite demand exceeding our optimistic expectations,” Goldman Sachs analysts said in a note.

“Non-core OPEC supply has been much stronger than expected, partly offset by OPEC cuts.”

For 2023, the US, which makes up two-thirds of non-OPEC+ growth, is forecast to deliver annual gains of 1.4 million barrels per day (bpd), according to the International Energy Agency (IEA).

Meanwhile, inflation in the eurozone appears to be thawing. On Friday, the EU’s statistics office confirmed annual inflation slowed sharply.

(Reporting by Nicole Jao, Natalie Grover, Florence Tan, and Sudarshan Varadhan; Editing by Marguerita Choy and David Gregorio)

Yen eyes best week in four months, dollar heads for weekly decline

SINGAPORE, Nov 17 – The yen was on track for its best week against the dollar in four months on Friday on the prospect of a narrowing US-Japan rate differential, with bets that the Federal Reserve is done raising rates leaving the greenback headed for a weekly loss.

A slew of weaker-than-expected US economic data released this week, led by a slowdown in inflation, has reinforced market expectations that the Fed has reached the end of its aggressive monetary tightening cycle, with focus now on when the first rate cuts could begin.

Market pricing shows just a 0.3% chance of another rate hike in December, as compared to a roughly 15% chance a week ago, with a 35% chance that the US central bank could begin easing monetary conditions as early as next March, according to the CME FedWatch tool.

That’s led to a decline in US Treasury yields alongside a fall in the dollar, which was on track to lose nearly 0.6% on the yen for the week, its worst weekly performance since July.

Against the greenback, the euro and sterling were likewise eyeing a weekly jump of more than 1.5% each, while the dollar index =USD was on track to lose 1.3%.

The euro steadied at USD 1.0851, while sterling last bought USD 1.2412.

“The market reaction to the (US) CPI was very substantial given that the inflation miss was only quite small, and that’s a bad sign for the dollar going forward,” said Sean Callow, a senior currency strategist at Westpac.

“It might set up a narrative whereby the markets start talking about the FOMC statement in December as not only being rates on hold but… that they might go to a more neutral stance.”

Separate data released this week showed US retail sales fell for the first time in seven months in October, while signs of a cooling US labour market continue to build as the number of Americans filing new claims for unemployment benefits increased to a three-month high last week.

The Japanese yen last stood at 150.72 per dollar, remaining on the weaker side of the 150 threshold and not far from Monday’s one-year low of 151.92 per dollar.

Despite a possible peak in US rates and even as insiders believe the Bank of Japan (BOJ) is priming markets for an end to negative interest rates, the wide gap between Japan’s ultra-low rates and those in the United States continues to keep the yen under pressure.

“I think (the BOJ) is still going to err on the cautious side. It’s our house view that they don’t touch policy settings for many, many months, so deep into next year,” said Callow.

“If that’s the case, then yes, the US dollar will probably have less yield appeal, but we don’t think it’s enough to really turn the tide — the gap is just still so wide.”

Elsewhere, the Australian and New Zealand dollars were likewise eyeing weekly gains of 1.7% and 1.3%, respectively, helped by the slide in the greenback.

The Aussie was last 0.08% lower at USD 0.6466, having showed little reaction to upbeat Australian jobs data released in the previous session.

The kiwi fell 0.14% to USD 0.5963.

(Reporting by Rae Wee. Editing by Sam Holmes)

US, Japan and S. Korea leaders to have trilateral meeting at APEC

SEOUL, Nov 17 – South Korean President Yoon Suk Yeol will meet with U.S. President Joe Biden and Japanese Prime Minister Fumio Kishida on Thursday in San Francisco, according to Yoon’s office.

The trilateral meeting comes on the sidelines of the Asia-Pacific Economic Cooperation (APEC) summit, three months after the three leaders met at Camp David in August.

Yoon and Kishida promised to push for deeper cooperation in a meeting earlier on the same day, Yoon’s office said on Friday.

“This year, bilateral cooperation is deepening with the reactivation of exchanges at each level, including at the summit level, and the restoration of consultation bodies between our governments,” Yoon was quoted as saying in a media pool report.

Kishida said he hopes to push forward with cooperation in politics, security guarantees, the economy and culture.

The two also discussed North Korea’s continued nuclear and missile tests and committed to working together with the United States on responding to the North, Japan’s foreign ministry said in a statement.

The pair met on Thursday, a day before they were due to attend a roundtable on technological cooperation at Stanford University.

They are expected to announce a joint supply network for carbon-neutral fuels such as hydrogen and ammonia, the Nikkei business daily has reported.

Yoon has made it a priority to mend ties with Japan since taking office in May 2022, and to restore trilateral security cooperation with the United States as North Korea ramps up its weapons programmes and openly threatens the South.

The moves have not always been popular at home, where many South Koreans believe Japan has not done enough to atone for its 1910-1945 occupation of the Korean peninsula.

Yoon and Kishida held a summit with U.S. President Joe Biden in August, pledging to deepen military and economic cooperation and restore an alliance aimed at countering North Korea’s threats and China’s growing influence.

(Reporting by Josh Smith in Seoul; Editing by Sam Holmes and Christopher Cushing)

Gold set for first weekly gain in three on Fed pause bets

Nov 17 – Gold prices rose slightly on Friday, on track for their first weekly gain in three, as investors grew confident that the U.S. Federal Reserve is done raising interest rates, sending the dollar and Treasury yields lower.

Fundamentals

* Spot gold was up 0.2% at USD 1,984.26 per ounce, as of 0059 GMT, after hitting its highest since Nov. 6 in the last session. US gold futures were steady at USD 1,987.

* Bullion is up 2.5% so far this week.

* The dollar was on track for a weekly drop, making gold less expensive for buyers holding other currencies, while yields on 10-year Treasury notes hovered near two-month lows.

* The number of Americans filing new claims for unemployment benefits increased more than expected last week, which could help the Fed’s fight against inflation.

* On Tuesday, data showed US headline consumer prices were flat in October, against expectations for a 0.1% rise. Core CPI, at 0.2%, came in below a forecast of 0.3%.

* The slowing jobs market and weaker-than-expected consumer inflation data prompted market participants to revise their forecasts for future Fed action.

* Traders now widely expect the Fed to leave rates unchanged at its Dec. 12-13 policy meeting, according to the CME FedWatch tool.

* Lower interest rates decrease the opportunity cost of holding gold.

* Spot silver rose 0.6% to USD 23.83 per ounce, while platinum was flat at USD 892.58. Palladium eased 0.2% to USD 1,035.77 per ounce.

(Reporting by Brijesh Patel in Bengaluru; Editing by Subhranshu Sahu)

Consolidation, at a dovish inflection point

Nov 16 – A bout of consolidation across Asian markets on Thursday is likely after the previous day’s stellar gains, as investors adjust to what appears to be a decisive moment in the global interest rate and inflation cycle.

There is a growing consensus forming that major central banks’ interest rate-raising cycle is over, a conviction strengthened by a series of inflation reports and other indicators from major economies.

Figures on Wednesday showed that US producer prices fell at their fastest pace since April 2020, and UK consumer inflation undershot all forecasts. Oil prices fell again on Wednesday, and are now down more than 10% year-on-year.

Investors are increasingly pricing in more rate cuts next year, bond yields and the dollar are coming under downward pressure, and stocks and risk assets are buoyant. All in, financial conditions in most countries are loosening.

Some of that reversed on Wednesday – Treasury yields and the dollar rebounded a bit from the previous day’s slump – which may keep a lid on Asian markets on Thursday, even though Wall Street held onto its gains and closed higher.

Investors could be forgiven for taking a breather on Thursday after such as huge rally on Wednesday that saw the MSCI Asia ex-Japan, MSCI Emerging Market index, and Japan’s Nikkei 225 all post their biggest gains in a year, of 2.5% or more.

But they also have other major economic and corporate news to digest, which will inject an extra dose of caution into the trading session.

The economic calendar sees the release of Japanese trade data, machinery orders, and the closely watched ‘tertiary activity index’, as well as Australian unemployment and Chinese house prices.

Japan’s GDP figures on Wednesday were much weaker than expected, leading economists at Barclays and elsewhere to cut their 2023 and 2024 growth forecasts.

But financial conditions in Japan are the loosest since 1990, according to Goldman Sachs, which is partly why the Bank of Japan has stepped up its hawkish rhetoric and may end its negative interest rate policy early next year.

Laying that ground at a time when the economy is shrinking, however, is not ideal.

China’s house price data will be closely watched for signs that the property sector is beginning to stabilize. There are signs of stabilization elsewhere in Chinese markets – the yuan is its strongest in three months against the dollar, and foreigners are increasing their holdings of China’s onshore yuan bonds.

On the policy front, the Philippine central bank is expected to keep its key interest rate unchanged at 6.50% on Thursday, although there’s an outside chance it might hike to 6.75%.

On the corporate front, China’s Alibaba and Lenovo released their latest earnings reports.

Here are key developments that could provide more direction to markets on Thursday:

– Japan trade (October)

– China house prices (October)

– Philippines interest rate decision

(By Jamie McGeever)

Treasury yields rebound from 2 month lows on mixed economic data

NEW YORK, Nov 15 – US Treasury yields rebounded from two-month lows on Wednesday despite signs of slowing inflation after a revision of retail sales data showed strong gains in September.

Overall, retail sales dipped 0.1% last month, slightly less than the 0.3% economists polled by Reuters expected, according to the Commerce Department. Data for September was revised higher to show sales increasing 0.9% instead of the previously reported 0.7% rise.

At the same time, the headline reading of the Producer Price Index was down 0.5% month on month, well below the estimate of a 0.1% rise, following Tuesday’s reading of lower consumer prices. Producer prices rose 0.5% in September.

“It’s this Jekyll and Hyde bond market right now where one moment you’re applauding good inflation data and the next you’re worried about strong economic data,” said Lawrence Gillum, chief fixed income strategist at LPL Financial. “As long as the Fed has the potential to either raise rates again or prolong interest rate cuts you will see these sporadic movements in the bond market.”

The yield on 10-year Treasury notes was up 9 basis points to 4.531%. The yield on the 30-year Treasury bond was up 6 basis points to 4.681%.

The two-year US Treasury yield, which typically moves in step with interest rate expectations, was up 10.3 basis points at 4.920%.

Treasury yields, which move in the opposite direction of prices, plummeted on Tuesday following softer than expected consumer inflation data, pushing the 10-year Treasury yield down by its largest daily amount since March.

The mixed economic data Wednesday will likely stall any further large moves in yields, said Ian Lyngen, head of US rates strategy at BMO Capital Markets Fixed Income Strategy Team.

“We expect the market will drift sideways from here and a downward bias in yields will emerge as the weekend approaches,” he said.

November 15 Wednesday 3:35PM New York / 2035 GMT

	Price	Current Yield %	Net Change (bps)
Three-month bills	5.26	5.4197	0.003
Six-month bills	5.21	5.4401	0.005
Two-year note	100-37/256	4.9203	0.103
Three-year note	99-214/256	4.6843	0.113
Five-year note	101-138/256	4.5244	0.103
Seven-year note	101-218/256	4.561	0.103
10-year note	99-192/256	4.5314	0.090
20-year bond	93-152/256	4.8837	0.070
30-year bond	101-24/256	4.6818	0.061

DOLLAR SWAP SPREADS
	Last (bps)	Net Change (bps)
US 2-year dollar swap spread	0.00	0.00
US 3-year dollar swap spread	0.00	0.00
US 5-year dollar swap spread	0.00	0.00
US 10-year dollar swap spread	0.00	0.00
US 30-year dollar swap spread	0.00	0.00

(Reporting by David Randall; Editing by Nick Zieminski and Jonathan Oatis)

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