Dollar firm vs Aussie, euro on heightened recession worries

SINGAPORE/TOKYO/HONG KONG, Aug 16 (Reuters) – The safe-haven US dollar hovered near a one-week high on Tuesday while the Aussie, euro and Chinese yuan remained under pressure as weak global economic data reignited recession fears.

The dollar index, which measures the greenback against six major peers, held steady at 106.51, just below the previous session’s peak of 106.55, the strongest since Monday of last week.

The euro, the most heavily weighted currency in the dollar index, was little changed at USD 1.0158 after earlier dipping to the weakest since Aug. 5 at 1.0154.

Sterling was 0.1% down at USD 1.2040, the lowest since Aug. 5.

Against the yen, a much sought after haven currency, the dollar eased 0.09% to 133.19.

The global safety bid was driven by a raft of weak world economic indicators. On Monday, data showed US single-family homebuilders’ confidence and New York state factory activity fell in August to their lowest levels since near the start of the COVID-19 pandemic.

That followed surprisingly weak Chinese activity data spanning industrial output, retail sales and fixed-asset investment as a nascent recovery from draconian COVID-19 lockdowns faltered.

Against the offshore yuan, the dollar rose 0.07% to 6.8174, heading back toward Monday’s high of 6.8200, a level last since in mid-May.

The Australian dollar sank as low as USD 0.70005, threatening to drop below the psychological 70 cent mark for the first time since Wednesday.

New Zealand’s kiwi dipped to USD 0.6349, also the lowest since Wednesday.

The Reserve Bank of New Zealand is widely expected to raise rates by half a point again on Wednesday, with the focus on whether policymakers follow the Federal Reserve and Reserve Bank of Australia in shifting to a more data-driven approach.

“The weakness in the US and Chinese economies is typically a bad sign for commodity currencies,” including Aussie and kiwi, Commonwealth Bank of Australia strategist Joseph Capurso wrote in a note to clients.

“The path of least resistance for NZD is lower until the Reserve Bank of New Zealand’s policy meeting tomorrow.”

(Reporting by Kevin Buckland; Editing by Shri Navaratnam)

Philippines central bank to hike by 50 bps on Thursday

Aug 16 (Reuters) – The Philippine central bank will follow its surprise July rate hike with a half-point point rise on Thursday and another quarter-point increase in September to catch up with its peers in containing soaring inflation, a Reuters poll forecast.

Driven by higher transport and food prices, inflation in the Southeast Asian nation accelerated to 6.4% in July, its fastest pace in nearly four years, pushing the central bank to tighten monetary policy at a faster pace.

The Bangko Sentral ng Pilipinas (BSP) followed two modest quarter-point rate rises so far in this cycle with a hefty unscheduled 75 basis point rise on July 14, its most aggressive since the central bank shifted to an inflation-targeting approach in 2002.

The Aug. 8-15 Reuters poll showed nearly 70% of economists, 11 of 16, forecast the BSP would hike its key overnight reverse repurchase facility rate by another 50 basis points to 3.75% at its Aug. 18 meeting. Four expected a 25 basis point hike, while one said no change.

A strong 60% majority of economists, 10 of 16, forecast another 25 basis points hike at the September meeting, taking rates to 4.00%, where they were before the pandemic.

Seven economists forecast rates to reach 4.25% or higher by end-2022. Six expected rates to reach 4.00%, while the remaining three said 3.75% or lower.

“Governor (Felipe) Medalla has stated that a 25 or a 50 bp hike is likely in August, and we think higher-than-expected inflation suggests that the BSP will take the faster approach,” noted Shreya Sodhani, research analyst at Barclays.

“This would also be consistent with the BSP’s commitment to do more to get inflation in line with its target range, as it showed with the large frontloaded hike in July.”

Price pressures are widely expected to remain elevated in the coming months and a weaker peso, which has already fallen 9% this year, has further worsened the outlook through imported inflation.

Inflation was not forecast to fall within the target range of 2%-4% until mid-2023, according to a separate Reuters poll taken in July, largely in line with the central bank’s projection.

Last month, the central bank chief ruled out another surprise move on rates, signaling the next move would be smaller than the 75 basis points delivered in July.

Although annual growth slowed from 8.2% in the first quarter to 7.4% in the last one, it was still the second-fastest so far in Asia, giving the central bank room for further tightening.

BSP has raised rates by 125 basis points since May.

(Reporting by Devayani Sathyan; Additional reporting by Anant Chandak; Polling by Arsh Mogre; Editing by Hari Kishan, Ross Finley and Alex Richardson)

Stocks, dollar gain despite surprise weak China data

New York, Aug 15 (Reuters) – Global equities and the US dollar advanced on Monday despite weaker-than-expected economic data in China that prompted its central bank to cut its lending rate, stoking concerns of a global recession.

The People’s Bank of China unexpectedly cut key interest rates after the world’s second-largest economy reported July data on industrial output and retail sales that missed most analyst estimates.

China’s strict COVID-19 restrictions have hobbled activity at its main manufacturing hubs and popular tourist spots, including Shanghai, even as a deepening downturn continues in the property market.

Markets reversed earlier session losses and were slightly higher. The MSCI world equity index .MIWD00000PUS, which tracks shares in 50 countries, was up 0.23%. Overnight in Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan had closed 0.34% lower.

“You’ve been seeing a slowing trend in China amplified by the lockdowns,” said Tom Plumb, portfolio manager at Plumb Balanced Fund in Wisconsin.

“The credit problems they’ve had especially with real estate developers, that’s going to tie their hands for how aggressive they can go back to stimulation. But I think it’s a sign they’re going to try to be more accommodative.”

The US dollar strengthened following news of the Chinese central bank action amid disappointing data. The dollar index =USD, which measures the greenback against six peers, rose 0.785%, with the euro down 0.97% to USD 1.0158.

Oil prices dropped by more than 3% on demand concerns after the weak data from China, one of the largest importers of crude. Brent crude futures settled down 3.1% to USD 95.10 a barrel, while US West Texas Intermediate crude closed at USD 89.41, down 2.9%.

On Wall Street, major indexes climbed, reversing earlier session losses, following four straight weeks of gains and a likely moderation on US Federal Reserve interest rate hikes after a slowdown in inflation.

The Dow Jones Industrial Average rose 0.42% to 33,903.57, the benchmark S&P 500 gained 0.37% to 4,296.09 points, and the Nasdaq Composite added 0.59% to 13,123.89.

US Treasury yields were slightly lower as the market continued to assess to what extent a slowdown in inflation could impact the US Federal Reserve’s monetary tightening policies.

Benchmark 10-year Treasury yields were down to 2.795% from a 2.849% close last week. Two-year note yields fell to 3.1988% from 3.257%.

Gold fell over 1% to its lowest in a week on Monday amid sharp declines across precious metals due to a stronger dollar, with concerns over further rate hikes by the US Federal Reserve adding to pressure on bullion.

Spot gold dropped dropped 1.3% to USD 1,778.53 an ounce, while US gold futures fell 1% to USD 1,781.40 an ounce.

(Reporting by Chibuike Oguh in New York; Editing by Deepa Babington and Marguerita Choy)

NYSE delistings signal Beijing may be willing to compromise

HONG KONG, Aug 15 (Reuters) – The move to delist five Chinese state-owned enterprises (SOEs) from the New York Stock Exchange (NYSE) signals Beijing may be willing to compromise in order to strike an audit deal with the United States and end a more than decade-old dispute, analysts and advisers said on Monday.

The five SOEs including oil major Sinopec and China Life Insurance, whose audits have been under scrutiny by the US securities regulator, said on Friday they would voluntarily delist from the NYSE.

The US Securities and Exchange Commission (SEC) had in May flagged the five and many other companies as failing to meet US auditing standards, and the delisting signals China could compromise on allowing US auditors to access the accounts of private Chinese companies listed in the United States, some analysts said.

Beijing and Washington have been in talks to end a dispute that had threatened to kick out hundreds of Chinese firms from their New York listings if China did not comply with Washington’s demand for complete access to the books of US-listed Chinese companies.

“Having the state-owned companies not listed in the US allows the Chinese side to compromise in the negotiations,” said one Hong Kong capital markets lawyer, declining to be named due to sensitivity of the matter.

“They were more worried about having the SOEs’ accounts accessed,” said the lawyer, referring to authorities in Beijing. “A lot of the private companies are not thought to have data as sensitive as SOEs.”

Some observers, however, were less optimistic on the impact of the delistings.

“By taking the state-owned enterprises off the table, it would, in theory, give more room for the Chinese to make some concessions,” said Paul Gillis, a retired professor at Peking University’s Guanghua’s School of Management.

“But I think with the overall political environment between the US and China being what it is, it’s hard to reach a deal.”

COMPLETE ACCESS

US regulators have been asking for complete access to the audit working papers of New York-listed Chinese companies for years, but the Chinese authorities have pushed back on national security grounds.

In May, an SEC official said China could agree to the voluntary delisting of companies deemed “too sensitive” to comply with US requirements, which would ensure the remainder of companies and audit firms could meet US inspection and investigative processes, and avoid potential trading prohibitions.

Since then, however, the US Public Company Accounting Oversight Board (PCAOB), which regulates audits of US-listed firms and is overseen by the SEC, has said de-listing companies would not bring China into compliance because US rules require the agency to have retrospective access to company audit records.

The PCAOB’s position on the matter has not changed, a PCAOB spokesperson said on Monday. A spokesperson for the SEC did not immediately respond to a request for comment.

The China Securities Regulatory Commission did not respond to a query on Monday afternoon.

More than 270 Chinese companies are identified as at risk of trading prohibition, with the PCAOB determining it did not have complete access to their audit papers.

Concerns about the future of those companies on the New York exchanges have swirled in recent months, with global fund managers holding US-listed Chinese stocks steadily shifting towards their Hong Kong-traded peers.

Alibaba Group Holding (BABA) announced a fortnight ago it would switch its Hong Kong secondary listing to a dual primary listing, which analysts said would make it easier in the future if the e-commerce giant ever wanted to delist in the United States.

“As for private enterprises listed in the US, whether they may be allowed more discretion to cooperate with the PCAOB will probably depend on the sensitivity of data in their audit papers,” said Weiheng Chen, head of Greater China Practice at law firm Wilson Sonsini.

Private enterprises owning large amounts of geographic data and data that track location, movements and social behaviors of individuals and companies, are more likely being viewed as sensitive, Chen said.

After the delisting of the five SOEs, only two state-owned firms will remain listed in the United States – China Eastern Airlines and China Southern Airlines.

“China should be motivated to cooperate with the US SEC to ensure Chinese companies with no sensitive information will not be cut off from the US capital markets,” analysts at Jefferies wrote.

(Reporting by Scott Murdoch, Kane Wu, Xie Yu and Samuel Shen; Editing by Sumeet Chatterjee, David Holmes and Marguerita Choy)

Precious metals fall as dollar firms, gold hits 1-week low

Aug 15 (Reuters) – Gold fell over 1% to its lowest in a week on Monday amid sharp declines across precious metals due to a stronger dollar, with concerns over further rate hikes by the US Federal Reserve adding to pressure on bullion.

Spot gold slid 1.2% to USD 1,780.99 per ounce by 1:44 p.m. ET (1744 GMT) having hit its lowest since Aug. 8 earlier in the session. US gold futures settled nearly 1% lower at USD 1,798.10.

The dollar index rose 0.8%, making gold and other commodities priced in the greenback more expensive for overseas buyers.

“Gold has stuck around the USD 1,800 handle, and today a stronger dollar is pushing gold and the entire commodity complex lower,” said RJO Futures senior market strategist Bob Haberkorn.

“It is a cautious trade right now in gold, as the Fed is going to continue raising rates … investors do see rate hikes in the horizon.”

Investors await minutes from the Fed’s July meeting on Wednesday for cues on the likely magnitude of rate hikes in the coming months.

Higher rates tend to increase bond yields, raising the opportunity cost of holding non-yielding bullion.

Gold and silver prices are also lower on demand concerns after weak economic data from China, said Jim Wyckoff, senior analyst at Kitco Metals in a note.

Industrial output in China, the world’s top consumer of gold, expanded at 3.8% in July from a year earlier, slowing from a 3.9% rise in June.

Bullion attracts safe-haven flows during recession worries, but a slowing economy could potentially lead to low demand for physical gold.

Spot silver fell 2.5% to USD 20.29 per ounce, platinum dipped over 2.9% to USD 934.16, while palladium dropped 3.1% to USD 2,153.26.

“The looming likelihood of a recession in Europe has the potential to reduce industrial demand for silver,” Rupert Rowling, a market analyst at Kinesis Money, said in a note.

(Reporting by Ashitha Shivaprasad in Bengaluru; Editing by Vinay Dwivedi and Marguerita Choy)

China, US data renew EUR/USD parity risk

Aug 15 (Reuters) – EUR/USD fell to a five-session low on Monday after disappointing US and Chinese data rekindled worries about slower global growth, renewing the risk of a drop below parity as technicals also flash warnings to longs.

Dismal Chinese retail sales and industrial output data combined with a PBOC rate cut and massive downside miss in the Empire State manufacturing index heightened worries about global growth while euro zone struggles with potential energy shortages and falling Rhine river levels impacting trade.

Euro zone and global interest rates reacted bearishly. September 2023 Euribor prices rallied sharply as investors priced in a lower terminal ECB rate. The dollar’s yield advantage increased as German-US 2-year spreads widened, weighing down.

Technicals highlight downside risks. EUR/USD fell below the 10- and 21-day moving averages as well as the base of the rising wedge pattern on daily charts. Falling daily and monthly RSIs reinforce bearish signals.

Investors now await a slew of Fed speakers this week. A reiteration of hawkish risks would buoy the dollar.

Should risk aversion persist, EUR/USD could weaken, putting July’s low in focus.

(Christopher Romano is a Reuters market analyst. The views expressed are his own)

Asian bonds see first monthly foreign inflow in five months

Aug 15 (Reuters) – Overseas investors were net buyers of bonds from emerging Asian markets, excluding China, in July on hopes the United States might slow the pace of interest rate hikes as its economy feels the heat, while concerns over higher inflation levels subsided.

Foreigners moved a combined net total of USD 2.39 billion into Indonesian, Thai, Malaysian, South Korean and Indian bonds last month, marking their first month as net buyers since February, regulatory and bond market associations’ data showed.

“Some investors are adding back exposures to Asia bonds,” said Duncan Tan, a strategist at DBS Bank.

“Pressures have eased recently due some market expectations of a dovish Fed pivot and an attendant pull-back in the broad US Dollar,” he added, referring to speculation the US Federal Reserve might relax its pace of monetary policy tightening.

Data showed last month the US economy unexpectedly contracted in the second quarter as business spending declined and growth in consumer spending dropped to a two year low.

Investors also scaled back expectations for the size of a Federal Reserve rate hike next month, as US inflation slowed in July.

Foreigners purchased South Korean bonds worth USD 3.56 billion last month in their biggest net buying since December, while Indonesian debt attracted just USD 79 million, after four months of outflows in a row.

South Korean economic growth unexpectedly picked up in the second quarter, boosted by strong consumption.

However, foreigners sold USD 794 million worth of bonds in Malaysia, while India and Thailand recorded outflows of USD 258 million and USD 201 million, respectively.

As the market focus shifts from inflationary concerns to worries over growth, Asian bonds could attract some inflows, analysts said.

“We expect the large foreign bond outflows of 1H to reverse into small inflows in 2H” DBS’s Tan said.

(Reporting by Gaurav Dogra in Bengaluru; Editing by Mark Potter)

Dollar gains on safety flows after China data, yuan eases on rate cut

LONDON, Aug 15 (Reuters) – The safe-haven US dollar rose on Monday after a new batch of disappointing data from China bolstered global recession worries, while the yuan weakened following a People’s Bank of China surprise rate cut.

Chinese industrial output, retail sales and fixed-asset investment all fell short of analyst estimates on Monday, as a nascent recovery from draconian COVID-19 lockdowns faltered.

“Of course, bad data from China also weighs on recession worries for the rest of the world,” said Ipek Ozkardeskaya, market strategist at Swissquote. That pushed down the euro against the greenback, she added.

The dollar was also supported by Federal Reserve policymakers’ hawkish comments in response to early signs that US inflation may have peaked.

Richmond Fed President Thomas Barkin told CNBC on Friday that he would like to see inflation running at the Fed’s 2% target for “some time” before stopping rate hikes.

“The euro is slowly finding its way back down towards parity after the spike last week. It is too early for the Fed to take its foot off the brake, despite the drop in inflation,” said Jens Nærvig Pedersen, chief analyst, FX and rates strategy at DanskeBank. He maintained a bullish US dollar view.

The onshore yuan eased to a one-week low of 6.7696 per dollar, compared with the previous close of 6.7430, after the People’s Bank of China unexpectedly lowered borrowing costs on medium-term policy loans and a short-term liquidity tool for the second time this year.

“Despite the warning of inflation risk and flush liquidity conditions, the dominant downside risks from the COVID spread and property-sector rout prompted the PBOC to cut rates to stimulate demand,” said Ken Cheung, chief Asian FX strategist at Mizuho Bank.

The US dollar index against six peers rose 0.25% to 105.96, consolidating near the middle of its range this month.

Last week, fueling investor hopes for less aggressive Fed tightening, US data showed the first decline in import prices for seven months, following statistics showing US consumer and producer prices also cooling.

Analysts will scour minutes of the Fed’s most recent meeting, due to be released on Wednesday, for more clues on policymakers’ thinking, while retail sales data on Friday will give some fresh insight on the economy’s health.

Money markets now price 43.5% odds of another 75 basis-point rate hike by the Federal Open Market Committee in September, versus 56.5% probability of a slowing in the pace of tightening.

The euro eased 0.24% to USD 1.0232, weighed down by Europe’s struggles with the war in Ukraine, the hunt for non-Russian energy sources and a hit to the German economy from scant rainfall.

(Editing by Jacqueline Wong)

Current conditions support a bigger dollar rise

Aug 15 (Reuters) – High inflation, rising stock markets, a resilient economy, bullish techs and the belief that the U.S. currency has peaked following a very modest dip in CPI are the recipe for a bigger dollar.

At 8.5% yy in July, U.S. inflation is more than four times the Federal Reserve’s target and interest rates are expected to reach 3.5% this year in order to suppress it.

But the strength of the U.S. jobs market and soaring stock markets are giving the Fed greater leeway to lift interest rates faster and possibly further than currently expected.

Following the CPI data, speculators slashed bets on dollar rising from 17.4 billion to 13 billion. When U.S. interest rates were last at 2.5%, bets on it rising exceeded 39 billion.

Despite heavy selling, the dollar failed to break any major tech supports and is entrenched in an uptrend. It’s risen 17.5% since taper talk emerged last year and could rise much further without the restraint of big speculative bets.

Volatility has tumbled which, coupled with soaring stocks, is ground for carry trades, making the dollar – already the highest-yielding major currency – more attractive.

(Jeremy Boulton is a Reuters market analyst. The views expressed are his own)

Nikkei hits over 7-month high on Wall Street optimism, robust earnings

TOKYO, Aug 15 (Reuters) – Japan’s Nikkei share average jumped on Monday to its highest in more than seven months, supported by Wall Street’s gains at the end of last week, and as upbeat corporate earnings lifted risk appetite and prompted investors to scoop up beaten-down stocks.

The Nikkei rose 1.14% to 28,871.78, extending gains to a second session, while the broader Topix advanced 0.6% to 1,984.96.

Wall Street closed higher on Friday, as signs that inflation may have peaked in July increased investor confidence a bull market could be underway and spurred the S&P 500 and the Nasdaq to post their fourth straight weekly gain.

“There was optimism in the U.S. equities market in the previous session. That has promoted investors to make bets on stocks that had been sold off but reported strong earnings,” said Ikuo Mitsui, a fund manager at Aizawa Securities.

Investors appeared to show scant response to data that signalled Japan’s economy rebounded at a slower-than-expected pace in the second quarter from a COVID-induced slump.

“Investors are now trying to gauge whether the market has recovered, or there would be another retreat. But today it seems they are making positive bets.”

Shares of Pan Pacific International Holdings surged 11.48% after the operator of discount store Don Quijote raised its annual profit forecast.

Drugstore chains also traded higher, with Matsukiyococokara 3088.T rising 5.64% after the company reported gains in its quarterly profit and announced a share buyback.

Peer Sundrug jumped 10.77% after increasing its dividend payout forecast.

Daiichi Sankyo surged 14.52% after U.S. drugmaker Seagen said an arbitrator had ruled in favour of the Japanese drugmaker over an agreement between the two companies for using its drug technology.

Daiichi Sankyo was the second largest boost to the Nikkei, after technology investor SoftBank Group 9984.T, which rose 5.17%.

Uniqlo clothing store owner Fast Retailing climbed 0.92%.

Among losers, shares of Snow Peak 7816.T tanked 14.8% after the camping gear retailer cut its annual profit forecast.

(Reporting by Junko Fujita; Editing by Sherry Jacob-Phillips and Subhranshu Sahu)

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