Euro jumps to 3-week high amid hawkish ECB signals, dollar idles

TOKYO, Sept 12 (Reuters) – The euro jumped to a more than three-week peak versus the dollar on Monday, and sterling rose to the highest this month as European Central Bank officials pushed the case for further aggressive monetary tightening.

The greenback idled not far from a two-week low against a basket of peers ahead of key US inflation data this week that might give the Federal Reserve room to slow the pace of rate hikes at its Sept. 21 policy meeting.

The euro EUR leapt as high as USD 1.0130 early in the Asian day before last trading 0.32% stronger than Friday at USD 1.0079.

Sterling GBP rose to USD 1.1681, and was last 0.23% higher at USD 1.1610.

ECB policymakers see a rising risk that they will have to raise their key interest rate to 2% or more to curb record inflation in the euro zone, sources told Reuters.

In an interview with German radio over the weekend, Bundesbank President Joachim Nagel said that if the picture for consumer prices doesn’t change, “further clear steps must follow.”

The dollar index, which measures the currency against six major counterparts, was little changed at 108.78, holding close to those levels after falling back from a two-decade peak of 110.79 reached on Wednesday. It dipped to the lowest since Aug. 30 at 108.35 in the previous session.

Investors are wary ahead of Tuesday’s US CPI report, even as Fed officials continued their hawkish rhetoric on Friday, the final day for such comments before a black-out period leading up to the Federal Open Market Committee’s deliberations.

Fed Governor Christopher Waller said he supports “a significant increase at our next meeting,” while St. Louis Fed President James Bullard reiterated his call for a hike of 75 basis points.

“Officials have clearly articulated the need for the FOMC to keep raising interest rates until there is compelling evidence that inflation is falling,” Commonwealth Bank of Australia strategist Joseph Capurso wrote in a client note.

“Regardless of the outcome of the CPI report, we judge the FOMC has much more work to do,” meaning more upside for the dollar over the short and medium terms, he said.

The dollar, however, strengthened 0.36% to 143.215 against the rate-sensitive yen, heading back toward a 24-year zenith at 144.99 from Wednesday.

That came as the benchmark US 10-year Treasury yield

, which the currency pair often tracks closely, hovered around 3.315% in Tokyo trading, not far from last week’s nearly three-month high of 3.365%.

Japanese officials again hinted at intervention over the weekend, with a senior government spokesman saying in a local television interview that the administration must take steps as needed to counter excessive yen declines.

Analysts though doubt intervention would work without the backing of the Fed and other central banks, considering that the Bank of Japan is alone among developed markets in pressing on with stimulus.

“A coordinated effort is needed and right now with major central banks fighting inflation through tighter policy, global official support for JPY seems unlikely,” Rodrigo Catril, a strategist at National Australia Bank, wrote in a note.

“If the BOJ really wants to stop JPY’s decline, then they need to make changes to their ultra-easy policy,” he added. “The pressure is building.”

Elsewhere, the Australian dollar AUD slipped 0.23% to USD 0.6831, while New Zealand’s kiwi NZD edged 0.07% lower to USD 0.6099.

Bitcoin eased 0.4% to USD 21,750, after briefly pushing up to USD 22,350 for the first time since Aug. 19, as the cryptocurrency attempts to find its footing following its bounce from a nearly three-month low at USD 18,540 last week.

Philippines accepts higher yield for 182-day T-bills

MANILA, Sept 12 (Reuters) – Following are the results of the Philippine Bureau of the Treasury’s (BTr) auction of T-bills on Monday:

* BTr fully awards 5 billion pesos (USD 87.67 million) offer for 182-day T-bills at 3.634% avg yield vs previous avg 3.485%

* BTr rejects all bids for 91-day, 364-day T-bills

(USD 1 = PHP 57.03)

(Reporting by Enrico Dela Cruz; Editing by Martin Petty)

Gold subdued with spotlight on US inflation data

Sept 12 (Reuters) – Gold prices were flat on Monday, with investor focus being on a key US inflation reading as it could influence the size of the Federal Reserve’s next interest rate hike.

Spot gold held its ground at USD 1,714.41 per ounce, as of 0524 GMT.

US gold futures were down 0.2% at USD 1,725.00.

“There remains some lingering general de-leveraging downward pressure on gold, but this week’s inflation number may provide some relief,” said Clifford Bennett, chief economist at ACY Securities.

“A further indication that inflation may have peaked would be encouraging for the gold market. The Fed will continue to hike regardless, but that there may be some end in sight could be enough to tilt gold back up following recent sharp declines.”

The US Consumer Price Index data, due on Tuesday, is expected to show that August prices rose at an 8.1% pace over the year, compared with an 8.5% print for July.

Fed officials on Friday ended their public comment period ahead of the central bank’s Sept. 20-21 policy meeting, with strong calls for another oversized rate increase to battle sky-high inflation.

The markets are largely expecting the Fed to raise rates by 75 basis points this month. Higher interest rates increase the opportunity cost of holding the non-yielding bullion and boosts the dollar, in which gold is priced.

The dollar index hovered close to its lowest level since Aug. 30 marked on Friday.

Meanwhile, European Central Bank policymakers see a heightened risk that they will have to hike their key interest rate to 2%, sources told Reuters.

Spot gold is biased to break a resistance at USD 1,720 and rise towards USD 1,729, according to Reuters technical analyst Wang Tao.

Spot silver rose 0.7% to USD 18.91 per ounce, after touching its highest in more than two weeks earlier in the session.

Platinum dropped 0.6% to USD 875.49 and palladium fell 0.5% to USD 2,161.17.

(Reporting by Eileen Soreng in Bengaluru; Editing by Uttaresh.V and Sherry Jacob-Phillips)

Oil prices drop amid China COVID curbs, possible rate hikes

SINGAPORE, Sept 12 (Reuters) – Oil prices fell on Monday with the global fuel demand outlook overshadowed by COVID-19 restrictions in China and the potential for further interest rate hikes in the United States and Europe.

Brent crude futures LCOc1 dropped USD 1.01, or 1.1%, to USD 91.83 a barrel by 0630 GMT, after settling 4.1% higher on Friday. US West Texas Intermediate crude CLc1 was down USD 1.13 at USD 85.66 a barrel, or 1.3%, after a 3.9% gain in the previous session.

Prices were little changed last week as gains from a nominal supply cut by the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, a group known as OPEC+, were offset by ongoing lockdowns in China, the world’s top crude importer.

China’s oil demand could contract for the first time in two decades this year as Beijing’s zero-COVID policy keeps people at home during holidays and reduces fuel consumption.

“The lingering presence of headwinds from China’s renewed virus restrictions and further moderation in global economic activities could still draw some reservations over a more sustained upside,” said Jun Rong Yeap, market strategist at IG.

“The overall negatives seem to outweigh the positives,” said Yeap, adding the USD 85 mark for Brent crude prices could be in sight.

Meanwhile, the European Central Bank and the Federal Reserve are prepared to increase interest rates further to tackle inflation, which could lift the value of US dollar against currencies and make dollar-denominated oil more expensive for investors.

“Demand concerns centred on the impact of rising interest rates to combat inflation and China’s COVID-zero policy,” Commonwealth Bank of Australia analyst Vivek Dhar wrote in a note.

Still, global oil prices may rebound towards the end of the year – supply is expected to tighten further when a European Union embargo on Russian oil take effect on Dec. 5.

The G7 will implement a price cap on Russian oil to limit Russia’s lucrative oil export revenue following its invasion of Ukraine in February, and plans to take measures to ensure that the oil could still flow to emerging nations. Moscow calls its actions in Ukraine “a special operation”.

(Reporting by Florence Tan and Jeslyn Lerh; Editing by Kenneth Maxwell)

US recap: EUR/USD’s Aug-Sept drop halved in haven, rate hike reset

Sept 9 (Reuters) – The dollar index fell 0.5% on Friday, still suffering the effects of aggressive 75bp rate hikes by the BOC and ECB this week and profit-taking on overbought long positions, but it managed to rebound after testing key support.

EUR/USD’s rally reached 1.0114 by the 50% Fibo of the August-September 1.0369-0.9864 drop before falling toward parity due to uncertainty regarding EU efforts to shield the region from its energy crisis.

Hawkish talk from ECB members and reports the central bank might begin discussing quantitative tightening in October failed to get EUR/USD back to its early highs.

However, it retained a 0.58% gain on the day and found buyers by the 21-day moving average at 1.0026 that it cleared for the first time since Mid-August.

Below-forecast Chinese inflation data got some wondering whether that would feed into lower price pressures elsewhere, helping government debt yields retreat and riskier assets recover, to the detriment of the haven dollar.

Despite the Fed’s back-to-back 75bp rate hikes and a third one being priced in for September, 2-year bund-Treasury yield spreads have risen from August’s -2.79% trough to -2.31% currently, just below Thursday’s -2.28% rebound high.

The Fed has already convinced markets to price in a nearly 4% terminal rate next year and less risk of inflation running rampant. The ECB has more recently been forced to join the rapid rate-hiking party after euro zone inflation overtook US inflation.

The most overbought dollar pair coming into this week was USD/JPY, which was down 1% after recovering from Friday’s dive to key supports by the 141.505 low on EBS. The low was by the minimum 23.6% Fibo of the frothy 130.40-144.99 August-September surge.

September’s 139.00-144.99 rise to 24-year highs came despite the uptrend in 2-year Treasury-JGB yields going flat, leaving prices ripe for a correction, particularly with Japanese officials warning against the yen’s rapid fall.

But without the BoJ moving away from ultra-accommodation mode, USD/JPY weakness would have to rely mostly on weaker Fed hike expectations, which makes Tuesday’s US CPI a focus.

Sterling was up 0.8% in the first full day of mourning after the death of Queen Elizabeth, an event that prompted the BoE to delay its previously scheduled Sept. 15 policy meeting until Sept. 22. Gains to 1.1646 were trimmed after the dollar broadly recovered from its lows.

A spate of major UK economic data next week and US CPI will sharpen the focus on the pace of Fed hikes versus BoE hikes, but sterling has tumbled on rising gilt-Treasury yields spreads since mid-August due to the rising cost of fiscal support to dampen the impact of surging energy costs.

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

Gold gains as dollar dip offsets some pressure from rate hike bets

Sept 9 (Reuters) – Gold rose on Friday as the dollar’s retreat temporarily seemed to stave off some pressure on the precious metal from prospects of more interest rate hikes.

Spot gold rose 0.5% to USD 1,716.30 per ounce by 1:55 p.m. ET (1755 GMT), after rising to its highest since Aug. 30 earlier in the session. US gold futures settled 0.5% higher at USD 1,728.6.

The yellow metal was on track to rise 0.3% for the week, its first weekly rise in four.

“The US dollar index really dropped sharply overnight and that has supported the gold and silver markets. Also seeing some short-covering in the futures markets heading into the weekend,” said Jim Wyckoff, senior analyst at Kitco Metals.

The dollar dropped to a more than one-week low against its rivals, making greenback-priced bullion cheaper for overseas buyers.

However, the gold market continues to see a slow and steady reduction of exchange-traded funds (ETFs), and trading volumes on US futures markets continue to weaken, suggesting that the move higher is unlikely to be sustained, said independent analyst Ross Norman.

Investors now await US inflation data for August due early next week after recent hawkish comments from Fed Chair Jerome Powell cemented bets of a large rate hike.

“If consumer prices come in hotter than expected, gold might see selling pressure target the USD 1,680 region” and a sharp deceleration with pricing pressures might only provide a modest boost for gold, Edward Moya, senior analyst with OANDA, said in a note.

Higher interest rates increase the opportunity cost of holding non-yielding bullion.

In the physical gold market, demand in some Asian hubs remained firm this week amid lower prices.

Silver rose 1.2% to USD 18.79 per ounce and was set for a weekly gain.

Palladium gained 2% to USD 2,182.18 per ounce and was headed for its best week since July.

Platinum inched up 0.1% to USD 879.83 per ounce and was on track for its biggest weekly gain since early June.

(Reporting by Brijesh Patel, Arundhati Sarkar and Arpan Varghese in Bengaluru; Editing by Vinay Dwivedi and Shounak Dasgupta)

European stocks clock first weekly rise in four

Sept 9 (Reuters) – European stocks marked their first weekly rise in four on Friday, boosted by a surge in banking shares on expectations of further monetary policy tightening by the European Central Bank, while soaring metal prices lifted mining stocks.

The pan-European STOXX 600 index rose 1.5% to close at over one-week highs.

European stocks briefly shed gains in afternoon trading following reports that ECB policymakers are likely to kick off a debate next month about whittling down the 4-trillion-euro bond pile.

That comes a day after the central bank raised its key rates by an unprecedented 75 basis points (bps) and promised further hikes. Several money houses are forecasting another 75 bps rate hike in October.

Euro zone banks, rocked by worries over their profitability in a low interest rate environment, jumped 3.2% to mark their biggest percentage gains in almost two months. The index is still down 16.3% year-to-date.

“Traders are in risk-on mood even though yesterday there was a rate hike from the ECB and hawkish commentary from (Fed Chair) Jerome Powell,” said David Madden, market analyst at Equiti Capital.

“It is possible that dealers are getting used to the idea of interest rates being increased, and elevated bond yields.”

Miners jumped 3.0% as a softer dollar and fresh stimulus for China’s slowing economy boosted prices of industrial metals and iron ore.

Investors are focussed on a meeting of European Union countries’ energy ministers later in the day, where they will figure out solutions from a long list of possible measures to shield citizens from sky-high energy prices as winter approaches.

While the STOXX 600 managed to end the week 1.1% higher, investors doubt whether the rally can be sustained as Russia turns off its gas taps to Europe indefinitely amid a brewing cost-of-living crisis in the region.

“We remain negative on European equities given a backdrop of heightened geopolitical/energy uncertainty at the same time as central banks are tightening policy into an economic slowdown,” Morgan Stanley analysts said in a note.

Telecom Italia (TIM) shares rose 2.8% as sources close to the matter said it is close to kicking off a process to sell a minority stake in its enterprise service arm.

(Reporting by Shreyashi Sanyal in Bengaluru; Editing by Sherry Jacob-Phillips, Rashmi Aich and Jonathan Oatis)

India’s rice curbs to lift prices, stoke food inflation worries

SINGAPORE, Sept 9 (Reuters) – India’s decision to curb rice exports is expected to lift world prices of the staple and trigger a rally in rival wheat and corn markets, deepening concerns over food inflation.

Rice prices in key exporters India, Thailand, Vietnam and Myanmar are set to rise, traders and analysts said, hitting food importers already suffering from higher costs due to adverse weather and the Russia-Ukraine war.

India banned exports of broken rice and imposed a 20% duty on exports of various grades of rice on Thursday as the world’s biggest exporter of the grain tries to augment supplies and calm local prices after below-average monsoon rainfall curtailed planting.

“There is going to be substantial stresses on food security across many countries,” said Phin Ziebell, agribusiness economist at National Australia Bank. “Global fundamentals could see further upside across the grains complex.”

Chicago wheat prices rose on Friday, poised for a third straight weekly gain, as India’s move and talk about Russia’s restrictions on Ukrainian grain shipments underpinned the market.

“This is an inflationary move for food prices,” said Ole Houe, director of advisory services at agriculture brokerage IKON Commodities in Sydney. “This could trigger a rally in wheat and corn prices.”

India accounts for more than 40% of global rice shipments and competes with Thailand, Vietnam, Pakistan and Myanmar in the world market.

“Myanmar prices should go up by USD 50 a tonne while suppliers in Thailand and Vietnam will be quoting higher prices,” said one Singapore-based trader.

Five percent broken rice in Myanmar was quoted around USD 390-USD 395 a tonne, free on board, before India’s decision on export restrictions. In India, 5% broken white rice prices were quoted around USD 348 a tonne.

The decision will impact trade flows as India’s white rice prices of the variety are about USD 60-USD 70 per tonne cheaper than Thailand’s, Chookiat Ophaswongse, honorary president of the Thai Rice Exporters Association, told Reuters.

“More orders will flow for Thai and Vietnamese rice,” he said. “We have to wait and see how long this policy from India will go on for, if it is longer, it will increase demand for Thai rice exports…”

TOP BUYERS CHINA, PHILIPPINES TO SUFFER

The world’s top rice importers China and the Philippines are likely to take an immediate hit with higher rice prices.

China, one of the biggest importers of Indian broken rice for use in animal feed, is expected to shift to corn, traders said.

“We expect import volumes will decrease with this ban…the new Chinese corn crop is coming to market soon and there are large volumes of other imported grains,” said Rosa Wang, analyst at Shanghai JC Intelligence Co Ltd.

“In fact there is news already about an alliance of Thailand and Vietnam planning to increase export prices. We are analysing the possible impact of these possible moves,” Mercedita Sombilla, undersecretary for policy, planning and regulations at the Philippines’ Department of Agriculture, told Reuters.

Thailand and Vietnam have agreed to cooperate on raising prices, a move aimed at increasing their leverage in the global market and boosting farmers’ incomes.

(Reporting by Naveen Thukral; additional reporting by Chayut Setboonsarng in Bangkok, Khanh Vu In Hanoi, Dominique Patton in Beijing and Enrico Dela Cruz in Manila; Editing by Kim Coghill)

Oil supported by supply threats, but heads for weekly drop on demand fears

SINGAPORE, Sept 9 (Reuters) – Oil prices rose on Friday as investors considered Russia’s threat to halt oil and gas exports to some buyers, but crude was set for a second weekly decline as central banks’ aggressive rate hikes and China’s COVID-19 curbs weighed on demand.

Brent crude futures rose 22 cents, or 0.3%, to USD 89.37 a barrel by 0635 GMT. US West Texas Intermediate (WTI) crude futures climbed 10 cents, or 0.1%, to USD 83.64.

“I think the selloff in oil prices may come to a pause for now due to a recovery in risk sentiment across the board,” said CMC Markets analyst Tina Teng, adding that a weaker dollar and falls in bond yields have offered support for a rebound in risk assets.

“Fundamentally, a sharp decline in the US SPR suggests that undersupply is still a predominant issue in the physical oil markets, though recession fears may continue to weigh,” Teng said.

Both oil benchmarks were headed for a weekly drop of 4%, with the market sliding at one point this week to its lowest level since January.

The decline has been checked by underlying supply tightness amid Russia’s threat to cut oil flows to any country that backs a price cap on its crude, a small output cut by the Organization of the Petroleum Exporting Countries (OPEC) and allies, and a weaker outlook for US oil production growth.

The US Energy Information Administration on Thursday said it expected US crude output to rise by 540,000 barrels per day to 11.79 million bpd in 2022, down from an earlier forecast for a 610,000 bpd increase.

Analysts said in light of the supply outlook, the sell-off, which sent the 50-day moving average below the 200-day moving average mid-week in what’s referred to as a “death cross”, may have been overdone, as demand in China, the world’s biggest oil importer, could recover swiftly.

“China demand is more difficult to predict, but a post-COVID reopening has previously seen a snap back rather than a gradual rise in demand. In that context the fundamentals appear skewed against the latest technical signals,” National Australia Bank analysts said in a note.

For now, curbs are tightening in China. The city of Chengdu on Thursday extended a lockdown for most of its more than 21 million residents, while millions more in other parts of China were urged not to travel during upcoming holidays.

(Reporting by Sonali Paul in Melbourne and Jeslyn Lerh in Singapore; Editing by Kenneth Maxwell, Kim Coghill and Tom Hogue)

Asia shares edge higher as dollar eases

SYDNEY, Sept 9 (Reuters) – Asian shares crept higher as the dollar eased, with markets turning calmer after a record interest rate hike from the European Central Bank and hawkish comments from the US Federal Reserve Chair reinforced bets of aggressive tightening ahead.

MSCI’s broadest index of Asia-Pacific shares outside Japan .out a gain of 0.3% early on Friday. But it was headed for a weekly drop of 1.2%, battered by a slew of outsized rate hikes from global central banks this week – and the expectations of more to come.

Japan’s Nikkei rose 0.3%, Chinese blue chips were up 0.2%, while Hong Kong’s Hang Seng Index advanced 0.4%.

Overnight, Wall Street’s main indexes posted modest gains after heavy selling earlier in the week. S&P 500 futures rose 0.3% and Nasdaq futures was up 0.5%, in a sign of improved risk appetite as markets stabilised.

Fed chair Jerome Powell on Thursday said the bank is “strongly committed” to controlling inflation but there remains hope it can be done without the “very high social costs” involved in prior inflation fights.

“With Powell offering little in the way of push-back against market pricing, we think that the FOMC will affirm market expectations. In addition, we now expect a 50 bp (basis point) hike in November, though it is a close call,” said analysts at Barclays.

US rate futures have priced in an 86% chance the Fed will hike by another 75 basis points at this month’s meeting, which would increase the Fed funds rate to 3.0% to 3.25%. That was up from a 77% probability a day earlier.

US Treasury yields climbed slightly on Friday, with the yield on benchmark two-year notes edging 4 basis points higher to 3.5264%. The yield on 10-year bonds stood at 3.3284%, compared with its previous close of 3.2920%.

Across the Atlantic, the European Central Bank raised interest rates by a record 75 basis points and also signalled further hikes to fight inflation, even as the bloc’s economy is heading for a likely winter recession.

That sent euro zone government bond yields soaring and supported the euro. Germany’s two-year bond yield climbed more than 20 bps to 1.326%, its highest since 2011, while 10-year bond yields were up 14 bps to 1.71%.

The euro gained 0.5% to USD 1.0049 and managed to stand above parity with the U.S. dollar.

The dollar eased 0.3% against a basket of major currencies.

For the week, though, it has surged 2.6% against the rate-sensitive yen. The yen has been a victim of the dovish monetary stance from the Bank of Japan, in contrast with rate hikes elsewhere.

Oil prices turned down in early trade on Friday and were headed for a 4% weekly drop on worries that central banks’ aggressive rate hikes and China’s COVID-19 curbs will hurt demand.

US crude dipped 0.1% to USD 89.07 a barrel while Brent crude rose to USD 89.07 per barrel.

Elsewhere, Britain’s new leader, Liz Truss, on Thursday announced a cap on soaring consumer energy bills for two years to cushion the economic shock of war in Ukraine.

Gold was slightly higher. Spot gold was traded at USD 1713.99 per ounce.

(Editing by Kenneth Maxwell)

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