Dollar gains after strong New York factory survey

NEW YORK/LONDON, April 17 (Reuters) – The dollar rose on Monday after New York state factory activity in April increased for the first time in five months, helping bolster expectations the Federal Reserve will raise interest rates in May.

Also bolstering the dollar was a report showing confidence among US single-family homebuilders improved for a fourth straight month in April.

The dollar index, a measures of the currency against six major peers, rose 0.413% after the Empire State Manufacturing index shot to 10.8 from -24.6 in March, far higher than expectations of -18 in a Reuters poll of 35 economists.

The new orders index rose 47 points to 25.1, while the shipments index added 37 points to 23.9, substantial increases after they had declined in recent months, the New York Fed said.

“It’s the best reading since last July with a big jump in orders and has taken the dollar higher on this,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.

“The economy still looks like it’s growing above what the Fed says is its speed limit,” he said. “The market is under-estimating chances of another hike after May. Now the market says the Fed is going to cut later, but I think that the economy is showing itself to be resilient.”

Futures trading showed the probability of the Fed raising its lending rate to a range of 5.00%-5.25% when policymakers conclude a two-day meeting on May 3 rose to 88.7% from 78% on Friday, CME Group’s FedWatch Tool showed.

Fed funds futures also showed that expectations the Fed will start cutting rates later this year were pushed back to November from September, with a smaller cut now anticipated.

The outlook of US interest rates relative to the monetary policies and economies of other countries can boost or erode the dollar’s value.

The euro slid 0.66% to USD 1.0926 after hitting a one-year high of USD 1.108 on Friday. Traders expect further interest rate hikes from the European Central Bank as last month’s banking crisis fears have faded.

The yen weakened 0.45% at 134.40 per dollar as the Bank of Japan stuck to its easy-money policies, helping the greenback rise to its highest level since March 15.

“The dollar has bounced back but also we’ve had comments from the Bank of Japan indicating that there is no real reason for them to pull back from their ultra easy policy,” said Jane Foley, head of FX strategy at Rabobank.

New Bank of Japan Governor Kazuo Ueda last week made clear that the country would remain a “dovish” outlier by keeping interest rates at ultra-low levels for the time being.

Sterling was last trading at USD 1.2374, down 0.31% on the day.

The Mexican peso lost 0.11% versus the dollar to trade at 18.04, while the Canadian dollar fell 0.25% versus the greenback to 1.34 per dollar.

(Reporting by Herbert Lash, additional reporting by Harry Robertson in London; Editing by Muralikumar Anantharaman, Mark Potter and Andrea Ricci)

Gold slides below USD 2,000, market eyes Fed rate hike cues

April 17 (Reuters) – Gold reversed course to slip below the key USD 2,000 level on Monday, pressured by a stronger dollar and higher Treasury yields, while investors looked for cues on whether the market will see a ‘one and done’ rate hike by the US Federal Reserve in May.

Spot gold was down 0.4% at USD 1,995.42 per ounce by 1:40 p.m. EDT (17:40 GMT) after rising as much as 0.6% earlier in the session. US gold futures GCv1 settled 0.4% lower at USD 2,007.

A stronger US dollar and the rise in bond yields, along with some profit-taking from recent gains, are putting pressure on gold, said Jim Wyckoff, senior analyst at Kitco Metals.

US dollar gained 0.6%, making greenback-priced bullion less attractive for overseas buyers, while benchmark Treasury yields climbed to a more than two-week high.

The trend for gold is still up, and “I wouldn’t be surprised to see gold hit a new record high in the coming weeks,” added Wyckoff.

Gold dropped 2% on Friday after the dollar bounced, with Fed officials suggesting the central bank could hike rates by another 25 basis points (bp) next month.

However, economic data last week began to fill in the portrait of a US economy that is losing momentum, intensifying bets that the Fed’s next increase will be its last.

The CME FedWatch tool shows markets are pricing in an 86% chance of a 25-bp hike in May, followed by 2-in-3 chances of a pause in June.

The USD 1,980-USD 2,000 range is a promising support zone for bullion, said Carlo Alberto De Casa, external analyst at Kinesis Money.

Investors will focus on comments from Fed officials this week before they enter into a blackout period from April 22 ahead of the Fed’s May 2-3 meeting.

Spot silver fell 1.4% to USD 24.99 per ounce, platinum was up 0.4% at USD 1,048.36 and palladium gained 3.4% to USD 1,554.85.

(Reporting by Deep Vakil and Ashitha Shivaprasad in Bengaluru; Editing by Shailesh Kuber)

Nikkei gains in longest rally in 9 months on boost from exporters, banks

TOKYO, April 17 (Reuters) – Japan’s Nikkei share average ended at a more than one-month high on Monday, rising for the seventh straight session, as a weaker yen lifted exporters and bank shares tracked sharp gains of their US peers at the end of last week.

The Nikkei share average edged up 0.07% at 28,514.78, its highest close since March 9 and posted its longest rally since mid-July.

The broader Topix advanced 0.41% to end at 2,026.97.

“Overall, the market is strong, supported by the yen’s weakness, which lifted automakers. And banks tracked sharp gains of US bank shares on Friday,” said Jun Morita, general manager – research at Chibagin Asset Management.

“But I would say the market is stronger than it should be because there are signs of an economic slowdown going forward.”

The dollar hit a one-month high against the yen, as resilience in core US retail sales and impressive Wall Street bank earnings raised market expectations for an interest rate hike from the US Federal Reserve in May.

The S&P 500 banking sector jumped 3.5%, as a series of major US banks, such as Citigroup Inc C.N and JPMorgan Chase & Co beat earnings expectations.

Among individual stocks, Toyota Motor rose 1.44% and Nissan Motor rose 1.43%.

Mitsubishi UFJ Financial Group and Sumitomo Mitsui Financial Group gained 2,57% and 2.50%, respectively.

In Japan, shippers rose 2.52% to become the top performer among the Tokyo Stock Exchange’s 33 industry sub-indexes. Kawasaki Kisen jumped 3.53%.

Uniqlo brand-owner Fast Retailing lost 2.71%, after surging 8.5% in the previous session, becoming the biggest drag for the Nikkei.

Cosmetic maker Shiseido lost 1.97%.

(Reporting by Junko Fujita; Editing by Sohini Goswami and Rashmi Aich)

Oil holds above USD 80/bbl on OPEC+ cuts, traders eye China recovery

SINGAPORE, April 17 (Reuters) – Oil prices edged up slightly on Monday, supported by OPEC+’s plans to cut more output, while investors eyed Chinese economic data for signs of demand recovery in the world’s second-largest oil consumer.

Brent crude futures LCOc1 nudged 6 cents higher to USD 86.37 a barrel by 0650 GMT, while US West Texas Intermediate crude was at USD 82.55 a barrel, up 3 cents.

Both contracts notched their fourth weekly gains last week – the longest-such streak since mid-2022 – after the International Energy Agency (IEA) forecast record demand in 2023 of 101.9 million barrels per day (bpd), up 2 million bpd on last year.

However, the IEA warned in its monthly report that the output cuts announced by OPEC+ producers risked exacerbating an oil supply deficit expected in the second half of the year and could hurt consumers and a global economic recovery.

Rising costs for Middle East crude supplies, which meet more than half of Asia’s demand, are already squeezing refiners’ margins, prompting them to secure supplies from other regions.

Refiners are also ramping up gasoline output ahead of peak summer demand, while cutting diesel production amid worsening margins.

“While the flat price and time spreads have strengthened on the back of expectations of a tighter market, demand concerns clearly remain,” ING analysts said in a note.

“Weaker refinery margins remain a feature, with the weakness predominantly driven by middle distillates. Stronger crude prices will not be helping margins for refiners either.”

Meanwhile, oil exports from northern Iraq to the Turkish port of Ceyhan remained at a standstill almost three weeks after an arbitration case ruled Ankara owed Baghdad compensation for unauthorised exports.

Investors will be watching for the release of China’s first-quarter gross domestic product (GDP) data this week, which is expected to be positive for commodity prices, CMC Markets analyst Tina Teng said.

Earnings from US companies could also provide clues for the Federal Reserve’s policy path and the dollar’s trajectory, she added.

The greenback has been strengthening alongside interest rate hikes, making dollar-denominated oil more expensive for holders of other currencies.

Traders are betting that the Fed will raise its lending rate in May by another quarter of a percentage point and pushed out to late this year expectations of a rate cut, as typically occurs in a slowdown.

The market is pricing in a 78% chance of a 25 basis points (bps) rate hike in May, with fewer than 60bps of cuts priced in by the end of the year, IG Analyst Tony Sycamore said.

“(That) means some of the supportive tailwinds for crude oil demand from expectations of Fed rate cuts are starting to fade,” he said.

(Reporting by Florence Tan and Emily Chow; Editing by Jamie Freed)

Oil drops 2% on higher dollar, interest rate concerns

NEW YORK, April 17 (Reuters) – Oil prices turned lower on Monday as the US dollar strengthened and as investors mulled over a possible May interest rate hike by the US Federal Reserve, which could dampen economic recovery hopes.

Brent crude futures fell USD 1.55, or 1.8%, to settle at USD 84.76 a barrel, while US West Texas Intermediate crude dropped USD 1.69, or 2.1%, at USD 80.83 a barrel.

Both contracts notched their fourth weekly gain in a row last week, the longest such streak since mid-2022.

The US dollar has been strengthening alongside interest rate hikes, making dollar-denominated oil more expensive for holders of other currencies. The dollar index gained around 0.6% on Monday.

“The dollar is a little bit stronger, and that seems to be putting a little bit of pressure on oil here,” Price Futures Group analyst Phil Flynn said.

Traders are betting the Fed will raise its lending rate in May by another quarter of a percentage point and have pushed out to late this year expectations of a rate cut, as typically occurs in a slowdown.

Meanwhile, the release of China’s first-quarter gross domestic product (GDP) data at 0200 GMT on Tuesday is expected to be positive for commodity prices, with the International Energy Agency (IEA) forecasting it will account for most of 2023 demand growth.

However, the IEA also warned in its monthly report that output cuts announced by OPEC+ producers risked exacerbating an oil supply deficit expected in the second half of this year and could hurt consumers and a global economic recovery.

The Group of Seven (G7) coalition will keep a USD 60 per barrel price cap on seaborne Russian oil, a coalition official said, despite rising global crude prices and calls by some countries for a lower price cap to restrict Moscow’s revenues.

In Iraq, the federal government and the Kurdistan Regional Government (KRG) have ironed out technical issues essential to resuming northern oil exports from the Turkish port of Ceyhan to international markets, four sources told Reuters on Monday.

Turkey halted Iraq’s 450,000 barrels per day (bpd) of northern exports on March 25 after an arbitration ruling by the International Chamber of Commerce (ICC), which ordered Turkey to pay Baghdad damages of USD 1.5 billion for the KRG’s unauthorised exports between 2014 and 2018.

In Saudi Arabia, crude oil exports in February fell to 7.455 million bpd from 7.658 million bpd in January, official data showed on Monday.

US shale crude oil production in the seven biggest shale basins is expected to rise in May by 49,000 bpd to 9.33 million bpd, the highest on record, data from the Energy Information Administration showed on Monday.

(Reporting by Stephanie Kelly; additional reporting by Noah Browning, Florence Tan and Emily Chow; Editing by Mark Potter and Josie Kao)

Bigger banks rise while regionals slump as Q1 earnings season kicks off

April 14 (Reuters) – Shares in US banks were a mixed bag on Friday with JPMorgan Chase (JPM) soaring 7.0% after its quarterly report impressed investors while PNC Financial (PNC) was among regional bank decliners after it reduced growth expectations for 2023.

JPMorgan, the biggest US lender by assets, reported a first-quarter profit that beat estimates with interest income offseting weakness in dealmaking. Shares in Citigroup (C) climbed after its first-quarter profit also beat expectations as it earned more from borrowers paying higher interest on loans.

Also boosted by their rivals’ reports were Bank of America BAC.N and to a lesser degree Goldman Sachs (GS) – both due to report results on Tuesday. Morgan Stanley (MS) reports results on Wednesday.

However, Wells Fargo (WFC) investors were less impressed, with its shares down 0.2%, after it beat first-quarter profit expectations as it benefited from higher interest rates, but executives said they expect the US economy to slow in response to tighter monetary policy.

In the regional banking sector, which was hit by a crisis last month with the failure of Silicon Valley Bank and Signature Bank, First Republic (FRC) and Zions Bancorp (ZION) fell in sympathy with PNC, which gave loan and revenue growth guidance for 2023 that fell short of Wall Street’s expectations.

PNC’s net interest income, while higher than the year-ago quarter, was roughly 1% shy of the mean analyst expectation.

Credit Suisse analyst Susan Katzke also noted in research that PNC’s 2023 revenue guidance for growth of 4% to 5% was lower than previous expectations for 6% to 8% growth, while its estimate for average loan growth fell to a 5% to 7% range from a 6% to 8% range.

PNC shares were last down 1.9% while Zions was off 3.3% and Comerica Inc (CMA) shares fell 3.0%. First Republic shares fell 1.5%.

JPMorgan shares hit their highest level since early March and were on track for their biggest one-day percentage gain since November 2020.

Citi shares rose 4.2% and Bank of America was up 3.0% as their investors appeared to be encouraged by JPM’s news. Morgan Stanley shares rose 0.9% while Goldman shares were up 1.1%.

The S&P 500 bank index rose 3.1% after the reports.

Friday’s big jump in bank stocks helped a trader reap a big gain on a timely trade in Financial Select Sector SPDR Fund’s options. The ETF was last up 0.6%.

A trader, who had bought 100,000 of the XLF April USD 33.5 call options for about USD 1.2 million on Thursday, appeared to have sold the position for a profit of about USD 800,000, or 67%, early on Friday, according to data from options analytics firm Trade Alert.

(Reporting By Sinéad Carew; Editing by Josie Kao)

Gold beats sharp retreat as dollar bounces, rate hike bets grow

April 14 (Reuters) – Gold prices pulled back sharply on Friday after surging to a more than one-year peak in the last session, as the dollar bounced and a Federal Reserve official flagged the need for another interest rate hike.

Spot gold was down 1.8% at USD 2,003.60 per ounce by 01:52 EDT (17:51 GMT). US gold futures settled 1.9% lower at USD 2,015.80.

The dollar index bounced off a one-year low and Treasury yields rose after a key Fed official warned that the central bank needs to continue hiking rates to tame inflation.

Gold competes with the dollar as a safe haven amid economic or political turmoil, while gains in the US currency also dim appetite for bullion among overseas buyers.

Also holding back zero-yield gold, the CME FedWatch tool showed traders were now pricing in a 80.2% chance of a 25 basis-point hike in May compared with a 70% chance at the beginning of the week.

The metals market will likely weaken as we go into the “blackout period” ahead of the Fed decision in May with a 25 bps hike expected, said Daniel Pavilonis, senior market strategist at RJO Futures.

“Prices will stabilize somewhere around USD 2,000.”

But analysts said bullion’s outlook remained positive, following the stellar run over the past couple of sessions amid growing recession worries that could prompt the Fed to eventually end its rate-hike cycle.

“I still expect prices to hit record highs and extend gains to USD 2,100,” said Phillip Streible, chief market strategist at Blue Line Futures in Chicago.

On the physical front, rally in prices made physical gold buying unattractive across major Asian hubs this week.

Silver was down 1.8% at USD 25.34 per ounce, after rising to a year’s high of USD 26.07 earlier in the session, and is set for a fifth weekly gain.

Platinum fell 0.6% to USD 1,040.42, while palladium slipped 0.4% to USD 1,493.61, but both were on track for weekly rises.

(Reporting by Ashitha Shivaprasad in Bengaluru; Editing by Christina Fincher, Shailesh Kuber and Shweta Agarwal)

Global money market funds see huge demand for a seventh straight week

April 14 (Reuters) – Global investors were big buyers in money market funds for a seventh straight period in the week to April 12 after a strong US jobs report heightened expectations that the US Federal Reserve would raise interest rates in May.

Funds in the global money market drew a net USD 40.83 billion worth of inflows compared with a net USD 61.12 billion worth of purchases in the previous week, data from Refinitiv Lipper showed.

Money market funds continue “to benefit from high US real rates that forces deposits out of the banking system,” brokerage Jefferies said in a note to clients.

If the fed funds rate is discounted by core personal consumption expenditure (PCE) inflation, the real interest rate is currently a positive 0.275%.

The yield on the 3-month US Treasury bill, in which money market funds invest the most, surged to near a 16-year high of 5.175% on Thursday.

Global equity funds, meanwhile, obtained USD 545 million, marking their first weekly inflow in three weeks.

Investors purchased communication services and financial sector funds of USD 974 million and USD 664 million, respectively, while selling a net USD 845 million worth of healthcare funds.

Global bond funds saw inflows dipping to USD 3.43 billion in the week from USD 16.45 billion worth of net buying a week ago.

Inflows in government bond funds slipped to a nine-week low of USD 2.33 billion, while high-yield funds faced outflows of USD 172 million. Global short- and medium-term bond funds received USD 1.57 billion, the biggest inflow in five weeks.

Among commodities, investors purchased USD 402 million of precious metal funds in their fifth consecutive week of net buying, while disposing of a net USD 147 million worth of energy funds.

Data for 23,942 emerging market funds showed equity funds received a third weekly inflow, worth USD 227 million, while bond funds had USD 913 million worth of outflows after two weekly net purchases in a row.

(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; Editing by Tom Hogue)

China’s yuan hits 3-week high on strong exports, trade fair as dollar weakens

SHANGHAI, April 14 (Reuters) – The yuan on Friday hit the strongest level against the dollar in three weeks, and was set for the biggest gain in a month bolstered by China’s robust export performance in March and broad weakness in the greenback.

The spot yuan was changing hands at 6.8465 at midday, 215 pips firmer than the previous late session close, after China’s central bank set a stronger midpoint rate.

Data released on Thursday showed China’s exports shot up 14.8% in March from a year ago, after five straight months of declines. Optimism generated by the upcoming Canton Fair also helped counter some concerns over the soft outlook for global growth.

Free of the restrictions imposed during the pandemic, the Canton Fair – the country’s biggest trade expo – will be welcoming overseas attendees in person for the first time in three years from Saturday.

Also aiding yuan sentiment, China’s central bank governor Yi Gang said in remarks published on Friday that China’s economy is stabilising and likely to grow around 5% this year.

The yuan’s strength comes at a time when the dollar is weakening, as signs of softening inflation has strengthened expectations that the US Federal Reserve may be close to ending its aggressive tightening cycle.

The greenback took another leg down on Friday and the US dollar index, which measures the currency against six major peers, slid to a roughly one-year low of 100.78.

US Labor Department data released on Thursday showed the producer price index (PPI) fell by the most in nearly three years last month. Data released a day earlier had showed consumer price inflation moderating

(Reporting by Li Gu and Tom Westbrook)

Dollar sinks to one-year low as cooling inflation raises Fed pause expectation

By Rae Wee

SINGAPORE, April 14 (Reuters) – The U.S. dollar tumbled to a one-year low against a basket of currencies on Friday while the euro hit a one-year peak, as traders ramped up expectations of an imminent end to the U.S. Federal Reserve’s rate-hike cycle on signs of cooling inflation.

Data from the U.S. Labor Department on Thursday showed the producer price index (PPI) fell by the most in nearly three years last month, coming a day after inflation data pointed to moderation in consumer prices.

The greenback took another leg down on Friday and the U.S dollar index =USD, which measures the currency against six major peers, slid to a roughly one-year low of 100.78.

It was last 0.15% lower at 100.82, and was headed for a weekly decline of more than 1%, its steepest drop since January.

Meanwhile, the euro EUR=EBS rose to a fresh one-year top of $1.1075, pushing past its previous high from Thursday.

The common currency was last 0.2% higher at $1.1070, and on track for a weekly gain of more than 1.5%.

“The easiest way to express a dollar negative view has been with the euro,” said Ray Attrill, head of FX strategy at National Australia Bank.

“The significant downside surprise in U.S. PPI has made people a bit more convinced of the view that the Fed will (soon) be done … and (strengthened) conviction that inflation will allow the Fed to be cutting rates before the end of the year.”

Similarly, the British pound GBP=D3 hit a 10-month high of $1.2545, and was last 0.14% higher at $1.25405.

Money markets are pricing in a 69% chance the Fed will raise interest rates by 25 basis points next month, though a series of cuts are also being priced in from July through to the end of the year, with rates seen just above 4.3% in December. FEDWATCH

Adding to signs that global inflationary pressure is waning was an unexpected surge in Chinese exports, which in March shot up 14.8% from the same month a year earlier, stunning economists who predicted a 7.0% fall in a Reuters poll.

The upbeat Chinese data, alongside a robust March employment report in Australia, kept the Australian dollar AUD=D3 supported at around $0.6783 on Friday, having surged 1.3% in the previous session on the back of the data releases. The Australian and New Zealand dollars are often used as liquid proxies for China’s yuan.

“It was almost like a perfect positive storm for the Aussie,” said Attrill. “Starting with the employment numbers … and the China trade numbers which looked exceptionally good.

“You layer on top of that, the dollar weakness from the data last night and positive risk sentiment, and it was a (raft) of good news for the Aussie.”

The New Zealand dollar NZD=D3 similarly gained 0.19% to $0.6309, after jumping 1.3% on Thursday.

Elsewhere in Asia, Japan’s yen JPY=EBS rose marginally to 132.47 per dollar, while the offshore yuan CNH=D3 gained more than 0.5% to 6.8327 per dollar.

(Reporting by Rae Wee; Editing by Christopher Cushing)

((Rae.Wee@thomsonreuters.com;))

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