RPT-India’s cbank likely to raise inflation projection in June meeting, consider more rate hikes-source

Repeats story from late Wednesday with no changes to text

By Aftab Ahmed and Nupur Anand

NEW DELHI, May 11 (Reuters) – India’s central bank is likely to raise its inflation projection for the current fiscal year at its June monetary policy meeting and will consider more interest rate hikes, a source aware of the development said on Wednesday.

In its first rate move in two years and its first hike in nearly four, the Reserve Bank of India (RBI) raised the repo rate INREPO=ECI by 40 basis points (bps) to 4.40% following a emergency meeting earlier this month.

In April, RBI raised its inflation forecast for the current fiscal year to 5.7%, 120 bps above its forecast in February, while cutting its economic growth forecast to 7.2% for 2022/23 from 7.8%.

The RBI will “certainly” raise the forecast again in June, as it did not want to do it in the off-cycle emergency meeting in May, said the source, who did not want to be identified as the discussions are private.

The source did not detail how much the price forecast would be raised, but said that the RBI’s current view trails the International Monetary Fund’s inflation forecast of 6.1% for India.

The next meeting of the MPC is scheduled for June 6-8.

“The MPC did an off-cycle hike as it did not want to bunch off a big hike in just two meetings in June and August. They wanted to spread it (out),” the source said.

Inflation in March shot up to 7%, a 17-month high, on the back of rising food prices. It has now been above the upper limit of RBI’s 2%-6% tolerance band for three straight months and is likely to remain so in April.

The RBI cut the repo rate by a total of 115 bps in 2020 to cushion the impact of the COVID-19 pandemic and anti-virus measures. It is now looking to reverse those cuts at a faster pace than it wanted to earlier, the source said.

Before the crisis in Ukraine erupted, the RBI expected retail headline inflation to peak by March and then ease back towards 4% in the second quarter of 2022/23 that started on April 1. nL1N2UP0RV

‘KILLING DEMAND’

India’s economic recovery could be hurt by rising borrowing costs, as the central bank is likely to fully focus on fighting inflation.

“The RBI had said in the past that inflation was on account of supply concerns. The same narrative remains but now the supply side constrains have worsened. Now, RBI is forced to act,” the source said.

In the next 6-8 months, all central banks including RBI will be “killing whatever demand” there was in the economy in their fight to contain inflation, the source said.

“The risk of stagflation remains high and the world’s most powerful central banks do not have a weapon against it. Let’s wish that does not happen,” the source said.

The European Central Bank has already warned that Russia’s invasion of Ukraine could lead to a combination of low growth and high inflation, known as stagflation.

The official also said that the RBI will help the government to bring down bond yields using various instruments, though the degree of help would not be as much as that in the last two years.

On Monday, Reuters reported the government has asked the central bank to either buy back government bonds or conduct open market operations to cool yields that have hit their highest levels since 2019. nL2N2X11GS

The RBI has sold dollars to prop up the rupee, which fell to a record low on Monday and closed at 77.47 against the dollar. It intervened in the market in the last three days and will do so again if volatility persists.

The official said that the central bank was not targeting any particular levels but does not like “jerky” movements of over 0.50 Indian rupees against the dollar in one day.

(Reporting by Aftab Ahmed in New Delhi and Nupur Anand in Mumbai; Editing by Kim Coghill)

((Aftab.Ahmed@thomsonreuters.com; +91 99109 33884; Reuters Messaging: twitter: @aftabahmed00))

Investors cut valuations of Latam startups -Creditas founder

By Tatiana Bautzer

NEW YORK, May 11 (Reuters) – Investors have been reducing valuations of Latin American startups during the global stock market rout and in an environment of higher interest rates, said Sergio Furio, founder of unicorn fintech Creditas.

“Startups that raised cash at peak valuation, for example last July last year, will have to accept a reduction if they need more money this year”, said Furio. Following the public markets, multiples attributed to private companies fell. Shares of Latam’s largest fintech, digital bank Nubank NU.N, sank 60.6% this year.

So startups are trying to conserve cash, Furio added. Creditas’ latest funding was in January, a $260 million round in which the valuation reached $4.8 billion. The fintech will not raise capital this year, Furio said in an interview with Reuters before meeting with investors in New York.

The startup expects to moderate credit growth, as its consumers deal with higher inflation and lower disposable income. It also intends to present progress in the operation of Voltz, an electric motorbike maker in which Creditas invested 100 million reais.

The investment banking unit of Latin America’s largest bank, Itau BBA, is hosting its first conference in New York with Latin American CEOs since the start of the pandemic, with around 150 companies headquartered in Brazil, Mexico, Colombia and Argentina.

Emerging market investors have been more interested in Latin America since the Ukraine war, as the region is relatively insulated from the higher geopolitical risks. They also have become more demanding.

Alex Ibrahim, head of international markets at the New York Stock Exchange (NYSE), expects markets to reopen for new equity offerings from Latin America by September.

“Investors are more selective, demanding a clear path to profitability from startups”, Ibrahim said. Investors are more cautious about companies that burn cash. While the market is closed, the NYSE has been working to prepare candidates, including tech and industrial companies, to come to markets when there is a window.

(Reporting by Tatiana Bautzer; Editing by David Gregorio)

((tatiana.bautzer@tr.com; Tel: +55-11-5644-7756; Mob: +55-119-4210-4173; Reuters Messaging: tatiana.bautzer.thomsonreuters.com@reuters.net))

Vietnam leader interested in Biden economic framework, but needs to study details

WASHINGTON, May 11 (Reuters) – Vietnamese Prime Minister Pham Minh Chinh said on Wednesday that Hanoi was interested in helping the United States realize the aims of its proposed economic framework for the Indo-Pacific, but needed time to study the details.

Chinh, in Washington for a two-day summit between President Joe Biden and Southeast Asian leaders starting on Thursday, said he had had discussions on Biden’s Indo-Pacific Economic Framework (IPEF) with U.S. officials earlier on Wednesday.

“We would we would like to work with the U.S. to realize the four pillars of that initiative,” he told a question-and-answer session after delivering a speech at Washington’s Center for Strategic and International Studies.

He said the pillars were supply-chain stability, digital economy, the fight against climate change and a fourth related to labor, tax and combating corruption.

“These are very important to the U.S., to Vietnam and other countries alike,” he said, speaking through a translator.

However, Chinh said the “concrete elements” of the initiative had yet to be clarified.

“We are ready to engage in discussion with the U.S. to clarify what these four pillars will entail and when that is clarified, we would have something to discuss,” he added. “We need more time to study this initiative and see what it entails.”

Asian countries have been frustrated by a U.S. delay in detailing plans for economic engagement with the region since former President Donald Trump quit a regional trade pact in 2017, leaving the field open to U.S. rival China.

At a virtual summit with ASEAN last October, Biden said Washington would start talks about developing what has become known as IPEF, which aims to set regional standards for cooperation, but diplomats say this is likely to feature only peripherally this week. nL2N2X31PW

Japan’s Washington ambassador said this week IPEF is likely to be formally launched when Biden visits Japan later this month, but its details were still under discussion. nL2N2X10Z7

Analysts and diplomats say only two of the 10 ASEAN countries – Singapore and the Philippines – were expected to be among the initial group of states to sign up for negotiations under IPEF, which does not currently offer the expanded market access Asian nations crave given Biden’s concern for American jobs.

Chinh hailed the blossoming of Hanoi’s relations with the United States in recent decades and the explosion of bilateral trade to almost $112 billion annually, although he said the two sides should further advance cooperation to deal with the legacy of their hostility in the Vietnam War.

(Reporting by David Brunnstrom, Simon Lewis and Rami Ayyub
Editing by Alistair Bell)

((david.brunnstrom@thomsonreuters.com; +1-202 354 5835; Twitter: @davidbrunnstrom;))

Nasdaq falls more than 3% on inflation data

NEW YORK, May 11 (Reuters) – US stocks ended sharply lower on Wednesday, with the Nasdaq dropping more than 3% and the Dow falling for a fifth straight day after US inflation data did little to ease investor worries over the outlook for interest rates and the economy.

The benchmark S&P 500 lost 1.7% and is now down 18% from its Jan. 3 record closing high.

The Labor Department’s monthly consumer price index (CPI) report suggested inflation may have peaked in April but is likely to stay strong enough to keep the Federal Reserve’s foot on the brakes to cool demand.

The CPI increased 0.3% last month, the smallest gain since last August, while economists polled by Reuters had forecast consumer prices gaining 0.2% in April.

“It did not dispel the notion that there’s more to go in terms of reining in inflation,” said Quincy Krosby, chief equity strategist at LPL Financial in Charlotte, North Carolina.

“The market is trying to make sense of whether we’re also going to see growth pullback more than expected” as the Fed raises rates, she said.

Apple (AAPL) shares dropped 5.2% and were the biggest weight on the Nasdaq and S&P 500 indexes.

“There is much focus right now on Apple,” Krosby said. “Given its weighting, Apple is the bellwether for the market from many perspectives.”

Investor concerns about whether the Fed will continue to hike interest rates aggressively have hit growth stocks especially hard. The consumer discretionary and technology sectors fell about 3% each, leading S&P 500 sector declines.

The Dow Jones Industrial Average fell 326.63 points, or 1.02%, to 31,834.11, the S&P 500 lost 65.87 points, or 1.65%, to 3,935.18 and the Nasdaq Composite dropped 373.44 points, or 3.18%, to 11,364.24.

The Dow’s five-day decline was its longest losing streak since mid-February.

Energy shares ended higher and helped to limit some of the declines in the S&P 500 and Dow. Exxon Mobil Corp. (XOM) shares were up 2.1%.

Value outperformed growth shares in general. The S&P growth index was down 2.8% on the day versus a 0.5% decline in the S&P value index.

Investors are anxious to see more data on inflation Thursday, when US producer price index data is due.

Stocks have fallen this year following the rate concerns, as well as the Ukraine war and the latest coronavirus lockdowns in China.

Coinbase Global Inc. (COIN) slid 26.4% after its first-quarter revenue missed estimates amid turmoil in global markets that has curbed investor appetite for risk assets.

Volume on US exchanges was 15.38 billion shares, compared with the 12.75 billion average for the full session over the last 20 trading days.

Declining issues outnumbered advancing ones on the NYSE by a 2.16-to-1 ratio; on Nasdaq, a 3.70-to-1 ratio favored decliners.

The S&P 500 posted 1 new 52-week highs and 67 new lows; the Nasdaq Composite recorded 10 new highs and 1,221 new lows.

(Reporting by Caroline Valetkevitch; additional reporting by Amruta Khandekar, Devik Jain in Bengaluru and Sinéad Carew in New York; Editing by Arun Koyyur and Aurora Ellis)

April inflation ‘hot’ but does not see 75 bps Fed rate increase ‘for now’

May 11 (Reuters) – US April inflation at 8.3% remained “hot” but does not yet require the Federal Reserve to switch to three-quarter point rate increases, St. Louis Fed President James Bullard said on Wednesday.

The Fed’s current plan for half point increases is “a good benchmark for now,” Bullard said on Yahoo Finance. Large increases are “not my base case … I think we have a good plan in place,” Bullard said.

The comments from one of the Fed’s most vocal advocates of faster rate hikes show how tightly US central bankers have coalesced around the plan outlined by Fed Chair Jerome Powell last week to raise rates by half a point at the next two Fed meetings, and take stock along the way of how inflation is behaving and what more might need to be done.

Bullard, however, repeated on Wednesday that he feels the Fed will need to keep moving in those half-point increments for the remainder of 2022, pushing the federal funds rate to a range of between 3.25% and 3.5% by the end of the year.

That’s higher than the level many other Fed officials have projected so far.

But Bullard said data could push the Fed in either direction still.

“I think it is more state contingent … We want to take it one meeting at a time. It is possible inflation could moderate a lot,” he said. It is possible the real economy could take twists and turns … We don’t want to be promising today what we will do in December.”

(Reporting by Howard Schneider; Editing by Chris Reese and Sandra Maler)

Colombia to perform internal public debt swap

BOGOTA, May 11 (Reuters) – Colombia will perform an internal public debt swap to improve its debt profile, the finance ministry said on Wednesday.

The government will collect TES UVR domestic public debt securities – which have yields that are tied to inflation – in exchange for other UVR securities maturing in May 2025 and April 2035, as well as others securities denominated in pesos maturing in May 2044.

The operation will take place on Thursday, the ministry said.

The size of the exchange will depend on how many offers are received.

“The exchange will be carried out in accordance with the provisions (…) with regard to not increasing the net indebtedness of the nation and contributing to improving the profile of public debt,” the finance ministry said in a statement.

In April Colombia exchanged internal public debt for 2.6 trillion pesos ($336.2 million dollars).

($1 = 4,086.71 Colombian pesos)

(Reporting by Nelson Bocanegra
Writing by Oliver Griffin; Editing by David Gregorio)

((Oliver.Griffin@thomsonreuters.com; +57 304-583-8931;))

CANADA FX DEBT-C$ rebounds but gains capped by global economic uncertainty

Adds dealer quotes and details throughout; updates prices

Canadian dollar strengthens 0.3% against the greenback

Trades in a range of 1.2922 to 1.3039

Price of U.S. oil settles nearly 6% higher

Canadian bond yields ease across curve

By Fergal Smith

TORONTO, May 11 (Reuters) – The Canadian dollar strengthened against its U.S. counterpart on Wednesday as oil prices rallied, but gains for the currency were limited by investor nervousness about the global economic outlook.

The loonie CAD= was trading 0.3% higher at 1.2988 to the greenback, or 76.99 U.S. cents, after trading in a range of 1.2922 to 1.3039. On Tuesday, the currency touched its weakest level in 18 months at 1.3052.

Higher oil prices gave the Canadian dollar some support but the major focus for investors is the potential for interest rate hikes to slow global economic activity, said Darren Richardson, chief operating officer at Richardson International Currency Exchange Inc, adding that “fear-based trading” is dominating the market.

Wall Street fell after U.S. consumer price index data indicated that inflation is likely to stay hot for a while and keep the Federal Reserve’s foot on the brakes to cool demand.

USD-CAD gyrated around the 1.2963 level that marked a peak for the pair in December.

“If the market can close above that number at the end of the week that would probably indicate further strength in the U.S. dollar,” Richardson said.

The price of oil, one of Canada’s major exports, rebounded after plunging nearly 10% in the previous two sessions, buoyed by supply concerns as flows of Russian gas to Europe fell. U.S. crude oil futures CLc1 settled nearly 6% higher at $105.71 a barrel. nL2N2X302U

Bank of Canada Deputy Governor Toni Gravelle is due to speak on Thursday on commodities, growth and inflation, which could offer clues on the outlook for interest rates. BOCWATCH

Canadian government bond yields were lower across the curve, tracking the move in U.S. Treasuries. The 10-year CA10YT=RR eased 2.7 basis points to 2.983%, after touching on Monday its highest in 11 years at 3.173%.

(Reporting by Fergal Smith; Editing by Will Dunham and Sandra Maler)

((fergal.smith@thomsonreuters.com; +1 647 480 7446;))

Dollar slips after CPI data as Fed expectations in check

NEW YORK, May 11 (Reuters) – The dollar was lower on Wednesday after economic data showed inflation remained high but was unlikely to lead the Federal Reserve to shift to a more aggressive path of monetary policy.

The consumer price index rose 0.3% last month, the smallest gain since August, the Labor Department said on Wednesday, versus the 1.2% month-to-month surge in the CPI in March, the largest advance since September 2005.

On an annual basis, CPI climbed 8.3%, higher than the 8.1% estimate but below 8.5% the prior month.

The data signaled inflation may have peaked but was unlikely to quickly cool and derail the Fed’s current plans to tighten monetary policy.

The dollar index, which had touched a four-session low of 103.37 ahead of the report, immediately strengthened to a session high of 104.13 following the data, just below the two-decade high of 104.19 reached on Monday.

“Hope springs eternal here but at the end of the day markets are correct in thinking these inflation pressures are ultimately transitory, that we should see a diminishment in supply chain issues and demand as well for the coming months,” said Karl Schamotta, chief market strategist at Cambridge Global Payments in Toronto.

“Essentially to me, the challenge here is inflation expectations are well anchored across the spectrum … ultimately traders will look through this and we will see a bit of a reversal in the trend that we are seeing right now.”

The greenback has climbed more than 8% this year as investors have gravitated towards the safe haven on concerns about the Fed’s ability to tamp down inflation without causing a recession, along with worries about slowing growth arising from the war in Ukraine and rising COVID-19 cases in China.

Still, the dollar was choppy in the wake of the data as it retreated from its session high and last =USD fell 0.029% at 103.890, with the euro down 0.07% to USD 1.052.

After the Fed raised its benchmark overnight interest rate by 50 basis points last week, the largest hike in 22 years, investors have been attempting to assess how aggressive the central bank will be. Expectations are completely priced in for another hike of at least 50 basis points at the central bank’s June meeting, according to CME’s FedWatch Tool.

Atlanta Fed President Raphael Bostic said on Wednesday that rising interest rates on home mortgages, U.S. Treasury bonds and other credit instruments show the central bank remains credible in its attempts to thwart rising inflation.

Investors will get another look at inflation data on Thursday in the producer price index for April, with expectations of a monthly increase of 0.5% versus the 1.4% jump in March. On an annual basis, expectations are for a jump of 10.7% compared with the 11.2% surge the prior month.

The euro gained as European Central Bank has firmed up expectations that it will raise its benchmark interest rate in July for the first time in more than a decade to fight record-high inflation, with some policymakers even hinting at further hikes after the first.

The Japanese yen strengthened 0.48% versus the greenback at 129.79 per dollar, while sterling GBP= was last trading at USD 1.2258, down 0.52% on the day.

In cryptocurrencies, bitcoin BTC= last fell 3.88% to USD 29,797.31, after falling below USD 30,000 for the first time since July on Tuesday.

(Reporting by Chuck Mikolajczak; Editing by Alison Williams and Cynthia Osterman)

BUZZ-COMMENT-US recap: EUR/USD sheds post-CPI gains as risk appetite suffers

May 11 (Reuters) – The dollar index held steady on Wednesday after surrendering fleeting gains in the wake of above-forecast April CPI data, as the fall in annual inflation rates from the previous month focused markets on the possibility that the peak in U.S. price growth may have been passed nL2N2X315F.

Peak inflation would also mean markets had probably priced in the top of the Fed rate-hikes expected in coming months, a key development for those seeking the dollar’s hefty uptrend to either resume or retreat.

But hopes for such clarity were disappointed, with the dollar only marginally lower in post-London trading, with EUR/USD, USD/JPY and GBP/USD, stuck in recent consolidation ranges.

It might take a substantial deviation from forecasts for next Tuesday’s U.S. retail sales data to break the dollar out of consolidation ranges.

EUR/USD got early help from ECB President Christine Lagarde cementing expectations for rate hikes to start as soon as July nL5N2X32V5, but Euribor yields ended up lower on the session, allowing 2-year Bund-Treasury yield spreads to slide 8bp from Tuesday’s close and EUR/USD to shed its post-CPI report gains.

EUR/USD was about flat and posted its fourth consecutive lower daily high, though it held above May and April’s 1.0483/695 EBS trend lows.

Germany’s final April inflation reading at 7.4% came as Bundesbank President Joachim Nagel said nL2N2X30FN the bank expected the inflation rate in Germany to reach close to 7% in 2022.

Sterling fell 0.4%, also whipsawed by the post-CPI swings in Treasury yields and stocks, finding sellers at the 1.2400 high by Monday’s 1.2405 minor rebound high.

UK consumer despair amid a harrowing inflationary crunch has likely forced the BoE to take a more measured rate-hiking approach than the Fed into year-end nL5N2X157E.

Sterling clung to June 2020’s swing low support at 1.2252, with Brexit trade issues unsettled nL5N2X32GN.

USD/JPY fell 0.5% after a brief rebound with Treasury yields in the initial response to the mixed CPI data. Treasury yields retreated and stocks sank as the session wore on, weighing on Treasury-JGB yield spreads and sparking broader haven demand for the yen.

USD/JPY was below on-close pivot point support at 130.10 on EBS, a close below which would target last week’s 128.62 low.

USD/JPY flashed its first weekly uptrend-ending signal since embarking on its 14.5% rally off March’s lows. If new highs in Fed hike pricing aren’t made after Tuesday’s retail sales report, a broader correction is possible nL2N2X31OQ.

High-beta currencies were pushed about by Treasury yields swings but also stocks, which eroded earlier gains against the dollar and sent them tumbling against the haven yen.

Commodity prices were higher due to supply concerns and dollar strength.

Bitcoin and ether extended their slides amid derisking and the collapse in stablecoin TerraUSD nL2N2X30RZ.

For more click on FXBUZ

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

((Randolph.donney@thomsonreuters.com))

U.S. welcomes Marcos victory in Philippines -Blinken

WASHINGTON, May 11 (Reuters) – The United States welcomed Ferdinand Marcos Jr.’s presidential victory in the Philippines and looked forward to working with his administration, U.S. Secretary of State Antony Blinken said in a statement on Wednesday.

“Our special partnership is rooted in a long and deeply interwoven history, shared values and interests, and strong people-to-people ties,” Blinken said, citing the nation’s role in building a “resilient Indo-Pacific region.”

(Reporting by Brendan O’Brien; writing by Susan Heavey)

((sheavey@thomsonreuters.com; +1-202-898-8300;))

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