US recap: Dollar off with risk on before Tuesday’s key event risks

May 15 (Reuters) – The dollar retreated along a broad front on Monday, correcting risk-off-driven gains at the end of last week while markets braced for Tuesday’s US retail sales report and the next US debt ceiling talks.

A weak but highly volatile NY Fed report was taken with a grain of salt, while most of Monday’s Fed speakers pushed back against market expectations of rate cuts this year.

The dollar index’s 0.25% loss was a mirror image of EUR/USD’s gains, with both having tangled with dollar resistance levels on Friday and Monday.

The real action in FX Monday was between rebounding high beta currencies, such as the Australian dollar, and the lowest beta yen, with AUD/JPY gaining more than 1%, while USD/JPY managed just a 0.22% gain.

The risk-on bias was aided by hopes China will increase stimulus to help revive growth, but also on speculation that, in the end, the US will manage not to score a crisis-inducing own goal by defaulting on its own debt.

An actual default, not just delayed payments to those other than Treasury debt holders, would weaken the dollar’s standing as a reserve currency, though the market appears to expect that the worst will be averted.

Also, a plus for risk-taking was a bounce in beleaguered US bank stocks.

Sterling, which hues more closely to risk acceptance flows, and with employment and particularly wage data out Tuesday that could keep the BoE hiking, rallied throughout the day and accumulated a 0.65% rise.

USD/JPY’s 0.2% gain came after the 136.32 early high on EBS held by the May 2 low at 136.33, with May 2’s 137.78 high, by March’s 137.90 peak, triggering the three-day plunge to 133.50.

Hopes of the BoJ’s policy review reducing accommodation were dimmed by the government’s lukewarm reception to the plan.

(Editing by Burton Frierson; Randolph Donney is a Reuters market analyst. The views expressed are his own.)

Gold gains on dollar pullback, debt-ceiling talks in focus

May 15 (Reuters) – Gold advanced on Monday on a weaker dollar as traders stuck to bets on interest rate cuts before year-end despite comments from Federal Reserve officials, with a focus also on the US debt ceiling talks.

Spot gold was up 0.4% at USD 2,019.37 per ounce by 1:40 p.m. EDT (1740 GMT), rebounding from its one-week low touched on Friday.

US gold futures settled up 0.1% at USD 2,022.70.

The dollar eased from a five-week high, making bullion cheaper for overseas buyers.

“Investors will continue to deploy their capital in gold as the prospect of a rate-cutting cycle continues to firm over the next 12 months,” said Daniel Ghali, commodity strategist at TD Securities.

Most market participants were still betting on at least one rate cut before 2023 ends, according to the CME’s FedWatch tool. Higher interest rates dim appeal for zero-yield gold.

Minneapolis Fed President Neel Kashkari said there was more work to be done to rein in inflation, while Atlanta Fed president Raphael Bostic played down chances of rate cuts this year.

Any hawkish comments are “essentially disregarded” because the market is inferring what the Fed might end up doing based on incoming data as opposed to what they are saying, Ghali added.

The focus will be on more Fed speakers this week, including Chair Jerome Powell.

President Joe Biden and Republican House of Representatives Speaker Kevin McCarthy, meanwhile, entered a critical week for debt-ceiling talks to avert a devastating default.

While gold remains supported by factors including rate cut bets, a “major risk-on wave stemming from a deal could drag gold into the sub-USD 2,000 domain”, said Han Tan, chief market analyst at Exinity.

Silver rose 0.8% to USD 24.11 per ounce, platinum gained 1.6% to USD 1,066.27, and palladium climbed 1.4% to USD 1,530.34.

Rising demand from automakers, industry, and investors will push the global platinum market into its biggest deficit in years, three industry reports predicted.

(Reporting by Deep Vakil and Arundhati Sarkar in Bengaluru; Editing by Shilpi Majumdar)

Philippines pushes back retail dollar bond offering to Q3

MANILA, May 15 (Reuters) – The Philippine government is pushing back a planned offering of US dollar-denominated retail bonds to the third quarter, when the exchange rate may be more favourable for potential Filipino investors working overseas, a senior finance official said.

National Treasurer Rosalia de Leon said the “aspiration” was to raise USD 2 billion from the bond offering.

The government was previously looking at offering USD 2 billion to USD 3 billion worth of retail dollar bonds in April, the proceeds of which will be used to finance the government’s budget.

“We’re oozing with cash, so we also have to calibrate in terms of our borrowing. We’re also looking at the good window because right now the peso was at 56 (to the dollar),” de Leon told reporters on Friday.

“For those who are buying dollars with their peso, that’s relatively high. So we’re looking for a more comfortable exchange rate so that they’ll have an upside.”

(Reporting by Enrico Dela Cruz; Editing by Mike Harrison)

Turkey’s lira sinks to two-month low in post-election trade

LONDON, May 14 (Reuters) – Turkey’s lira slipped to a fresh two-month low as financial markets kicked off trading in the wake of the country’s Sunday presidential and parliamentary election with the race for presidency appearing headed for a runoff.

The currency weakened to 19.70 to the dollar before retracing some of its losses to 19.66, on track for its worst session since early November.

That was not far off the 19.80 level it hit in early March following deadly earthquakes in February.

Parties of both incumbent Tayyip Erdogan and opposition rival Kemal Kilicdaroglu were claiming the lead but sources in both camps admitted they may not clear the 50% threshold to win outright.

The presidential vote will decide not only who leads Turkey and shapes the foreign policy of the NATO-member country of 85 million people, but also how it is governed and its economic future amid a deep cost of living crisis.

“It is hard to foresee a market-positive scenario emerging from today’s double vote in Turkey,” Wolfgango Piccoli at Teneo wrote in a note to clients.

Analysts expect the lira to face sharp adjustments in the wake of the elections following years of economic imbalances and unorthodox monetary policy.

JPMorgan forecast the lira could soften to levels of 24-25 to the dollar. Goldman Sachs said in a note in recent days that its calculations showed the market was pricing the lira to weaken by 50% in the next twelve months, including a sharp devaluation post-election.

The lira, which is prone to sharp swings before regular trading hours, has weakened 5% since the start of the year.

The currency has lost almost 95% of its value over the last decade and a half as sugar-rush economic policies have led to spectacular boom and bust cycles and rampant bouts of inflation and currency market turmoil.

A potential second round is scheduled for May 28.

(Reporting by Karin Strohecker; Editing by Frank Jack Daniel and Chris Reese)

Australian shares to open marginally higher, NZ falls

May 15 (Reuters) – Australian shares are likely to open marginally higher on Monday even as bearish investor sentiment strengthened further in global markets after a report showed US consumer sentiment slumped to a six-month low in May.

The local share price index futures rose 0.1%, a 17.3-point premium to the underlying S&P/ASX 200 index close. The benchmark rose 0.1% on Friday.

New Zealand’s benchmark S&P/NZX 50 index was down 0.4% in early trade.

(Reporting by John Biju in Bengaluru; Editing by Cynthia Osterman)

Indian rupee falls on weak Asian peers, premiums at 3-month low

MUMBAI, May 15 (Reuters) – The Indian rupee inched lower on Monday, bogged down by the fall in Asian peers, while forward premiums reached their lowest since February.

The rupee was quoted at 82.20 per US dollar by 10:54 a.m. IST, down from 82.1625 in the previous session. The rupee had fallen by 0.4% last week, tracking the jump in the dollar index.

It is unlikely that the rupee will see a larger fall from current levels, a trader at a private sector bank said. He expected the Reserve Bank of India to step in and sell dollars if USD/INR reaches the 82.40-82.50 level.

The dollar, supported by safe-haven flows, was at its highest level in a month versus its major peers. Asian currencies dropped.

The dollar found support from the move up in U.S. yields. The two-year US yield was back to near 4% following data that slightly pushed up the possibility of a rate hike by the Federal Reserve in June. The odds though remained overwhelmingly in favour of a pause. FEDWATCH

A survey from the University of Michigan showed long-term inflation expectations jumping this month to their highest reading since 2011.

A couple of Fed officials on Friday indicated some uncertainty about whether the US central bank will in fact pause interest rate hikes next month.

Meanwhile, the one-year implied USD/INR yield dropped to 2.06%, thanks to the rise in US yields and India’s April inflation data which eased to a 19-month low of 4.7% in April.

“We believe a macro regime shift is underway from high growth-high inflation to low growth-low inflation, which is likely to cause the RBI to pause in the near term,” Nomura said in a note.

(Reporting by Nallur Sethuraman in Mumbai; Editing by Sohini Goswami)

PH fully awards USD 271M T-bill offer as yields drop

MANILA, May 15 (Reuters) – Following are the results of the Philippine Bureau of the Treasury’s (BTr) auction of T-bills on Monday:

* BTr fully awards PH P15 billion (USD 271.39 million) offer

* BTr awards PHP 5 billion of 91-day T-bills at 5.874% avg yield vs previous rate of 5.891%

* BTr awards PHP 5 billion of 182-day T-bills at 5.991% avg yield vs previous rate of 6.109%

* BTr awards PHP 5 billion of 364-day T-bills at 6.028% avg yield vs previous rate of 6.211%

* Details are on the BTr’s website.

(Reporting by Enrico Dela Cruz)

Factors to watch in the UK on May 15

May 15 (Reuters) – Britain’s FTSE 100 index is seen opening higher on Monday, with futures up 0.1%.

* SRAM & MRAM: India’s SpiceJet Ltd said on Monday that UK-based SRAM & MRAM Group will invest USD 100 million in its cargo division SpiceXpress, sending shares of the budget airline up as much as 4.8%.

* BOE: British public sector employers plan the biggest pay increases in over a decade and private sector deals are set to remain high, according to a survey published on Monday, potentially adding to worries at the Bank of England.

* GATWICK: Britain’s Gatwick airport shut its runway for almost an hour on Sunday over a “suspected drone” incident, Sky News reported.

* OIL: Oil prices slipped on Monday as concerns about fuel demand in top global oil consumers United States and China offset bullish sentiment about tightening supplies from any OPEC+ cuts and a resumption in US buying for reserves.

* GOLD: Gold prices edged higher on Monday as the US debt ceiling stalemate and concerns of an economic slowdown steered some traders towards the safe-haven metal.

* Britain’s FTSE 100 index closed higher on Friday, with healthcare and energy stocks leading as oil prices rebounded and drugmaker GSK jumped, while data showed the British economy grew slightly in the first quarter of the year.

(Reporting by Muhammed Husain in Bengaluru)

China stocks dip, Hong Kong wobbles as recovery worries weigh

HONG KONG, May 15 (Reuters) – China stocks started the week on a weak foot Monday, as a slew of downbeat economic data dampened investor confidence and heightened deflation fears.

** China’s blue-chip CSI 300 Index dipped 0.24%, while the Shanghai Composite Index fell 0.94%.

** Hong Kong’s Hang Seng Index inched up 0.14%, and the Hang Seng China Enterprises Index were flat.

** The country’s central bank on Monday rolled over maturing medium-term policy loans while keeping interest rates unchanged, despite growing concerns on the subdued recovery.

** Yuan on Monday weakened to its lowest point in more than two months after the dollar firmed on a jump in US consumers’ long-term inflation expectations.

** “Market sentiment remains very weak in our client conversations,” Hui Shan, chief China economist at Goldman Sachs said in a note.

** Discussions have quickly turned from “policymakers may tighten on better-than-expected data” last month to “policy should ease to stem deflation risks”, after April imports, inflation and bank lending data all missed consensus expectations last week, she said.

** On the geopolitical front, Washington and the EU will pledge joint action to tackle concerns focused on China about non-market practices and coordinate their export controls on semiconductors and other goods at a meeting this month, Reuters reported.

** Media stocks and telecom stocks fell 4% and 3.2% respectively.

** However, new energy sector jumped 2.9%, capping some losses.

** Hong Kong-listed tech firms slid 0.1%. Index heavyweight Tencent Holdings Ltd gained 2.7%.

** US-listed Chinese ADRs including and Tencent and Alibaba Group Holding Ltd are due to report first-quarter earnings this week.

(Reporting by Summer Zhen; Editing by Varun H K)

Australia, NZ dollars rebound from two-week lows, local yields climb

SYDNEY, May 15 (Reuters) – The Australian and New Zealand dollars rebounded from a two-week low on Monday, after being hammered by global growth concerns, US debt ceiling worries and a jump in US inflation expectations, while local yields climbed.

The Aussie rose 0.3% to USD 0.6660, after diving 1.6% last week – the biggest in two months – to a two-week low of USD 0.6637. It now faces major resistance at the 200-day moving average of USD 0.6723 and has support at April’s trough of USD 0.6573.

The kiwi dollar also inched up 0.2% to USD 0.6205, having plunged 1.7% on Friday alone to a two-week low of USD 0.6185, hurt by an easing in surveyed inflation expectations in New Zealand. It was down 1.6% for the week and has support at USD 0.6160.

The two currencies were burdened by growth concerns stemming from their home countries’ largest trading partner, China, after a slew of disappointing data hammered commodity prices from copper, iron ore to oil.

Late on Friday, a University of Michigan survey showed May US consumer sentiment slumped to a six-month low and long-term inflation expectations jumped to the highest since 2011, boosting the US dollar and Treasury yields.

Traders put the odds of Federal Reserve holding rates steady at 17.7%, compared with 8.5% a week ago. However, there are still as many as three quarter-point cuts priced into the market by year-end.

Helping the Aussie rebound could be the tightening bias from the Reserve Bank of Australia after the central bank surprised with a rate hike earlier this month when markets had looked for an extended pause.

National Australia Bank on Monday raised its projections for the peak in the cash rate, forecasting that at least one additional hike, bringing interest rates to 4.1%, is likely to be necessary to bring inflation back to target by mid-2025.

“We wouldn’t rule out the prospect of an additional rise to 4.35% if the data stays stronger for longer,” said economists at NAB in a note to client.

The RBA is due to publish the minutes of the May decision on Tuesday. Currently, markets have priced in a 87% chance of a pause in June, while seeing a higher risk of a move in August or September.

Local bond yields climbed higher. Three-year Australian yields gained 8 basis points (bps) to 3.107%, while the 10-years rose 7 bps to 3.399%.

(Reporting by Stella Qiu. Editing by Gerry Doyle)

2024 Mid-Year Economic Briefing: Navigating the Easing Cycle

Investing with Love: A Mother’s Guide to Putting Money to Work

Investor Series: An Introduction to Estate Planning

Quarterly Economic Growth Release: 5.4% Q12025

Policy rate views: Uncertainty stalls cuts