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Dollar hovers near three-month high as bonds sell off; risk currencies pare gains By Reuters

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© Reuters. A man displays US dollar notes after withdrawing cash from a bank in Harare

By Stanley White and Sagarika Jaisinghani

TOKYO (Reuters) – The dollar hovered near three-month highs on Monday after the U.S. Senate passage of a bumper stimulus bill sparked another sell-off in the bond market, while currencies of major commodity exporters pulled back as a broader risk-on trade lost momentum.

The stood at 92.073 against a basket of six major currencies, up 0.17% and near its three-month high of 92.201 set on Friday.

The Senate passed a $1.9 trillion COVID-19 relief plan, a day after a stunning U.S. jobs report sent the greenback to its highest level since November 2020.

“The dollar is in demand as the United States is the most services-heavy economy globally, and once the reopening narrative goes in full swing, that will provide the icing on the cake,” said Stephen Innes, chief global markets strategist at Axi.

While investors have increased bets on a faster economic rebound this year, concerns about higher inflation have pushed up bond yields despite assurances from central banks including the U.S. Federal Reserve that monetary policy will stay loose.

The yield on the benchmark U.S. 10-year Treasuries hovered near one-year highs on Monday, while U.S. Nasdaq futures fell about 1% and European stock index futures pared gains as the selloff also spread to other risk assets. [MKTS/GLOB]

Speculators cut their net short dollar positions in the latest week to $27.80 billion, which is the smallest short position since Dec. 15 and suggests that dollar bears are giving up on betting against the greenback. [IMM/FX]

The dollar held near a one-month high against the British pound, which traded at $1.3819, and a three-month high against the euro, which stood at $1.1904.

Against the low-yielding yen, the greenback held steady at 108.39 yen, having hit a nine-month high of 108.645 on Friday.

“More significant pushback from other central banks to their respective bond markets over the last week than the Fed provided has given reason for the dollar move to broaden out,” Innes said.

eased to a more-than-two-month low, with the bounce in the dollar and U.S. yields prompting many investors to re-evaluate forecasts for the yuan, which the market had expected to be stronger for the remainder of this year. [CNY/]

The Australian dollar rose 0.2% to $0.7696, but was well off its session high of $0.77230. The New Zealand dollar was down about 0.1% after earlier rising 0.4% to $0.719. The antipodean currencies have been in demand because of their links to the global commodities trade.

The U.S. currency fell 0.38% against the Norwegian crown to 8.5283 and eased slightly to 1.2637 Canadian dollars as traders bought the currencies of oil exporters.

Some traders said a jump in futures above $70 a barrel for the first time in more than a year triggered a flurry of bids for commodity currencies at the start of Asian trading.

========================================================

Currency bid prices at 0430 GMT

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Euro/Dollar $1.1904 $1.1908 -0.05% -2.59% +1.1932 +1.1899

Dollar/Yen 108.3950 108.2600 +0.12% +4.93% +108.4850 +108.3450

Euro/Yen 129.03 129.09 -0.05% +1.66% +129.3900 +128.9800

Dollar/Swiss 0.9318 0.9311 +0.08% +5.33% +0.9319 +0.9299

Sterling/Dollar 1.3821 1.3831 -0.09% +1.15% +1.3864 +1.3810

Dollar/Canadian 1.2654 1.2649 +0.05% -0.62% +1.2663 +1.2624

Aussie/Dollar 0.7696 0.7680 +0.21% +0.05% +0.7722 +0.7686

NZ 0.7158 0.7165 -0.10% -0.32% +0.7190 +0.7152

Dollar/Dollar

All spots

Tokyo spots

Europe spots

Volatilities

Tokyo Forex market info from BOJ



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China Feb exports post record surge from COVID-19-depressed 2020 levels By Reuters

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© Reuters. Cranes and containers are seen at the Yantian port in Shenzhen, following the novel coronavirus disease (COVID-19) outbreak

BEIJING (Reuters) – China’s February exports grew at a record pace from a year earlier when COVID-19 battered the world’s second-biggest economy, customs data showed on Sunday, while imports rose less sharply.

Exports in dollar terms skyrocketed 154.9% in February compared with a year earlier, while imports gained 17.3%, the most since October 2018. The data did not include figures for January alone.

In the January-February period, exports jumped 60.6% from a year earlier, when lockdowns to contain the pandemic paralysed the country’s economic activity. That exceeded the forecast of analysts in a Reuters poll for a 38.9% surge.

Strong exports, which benefited from China’s success in largely containing the public health crisis, have helped fuel the country’s recovery from a pandemic-induced paralysis.

The surge was driven by a rebound in foreign demand, customs said in a statement on its website, citing improvements in manufacturing industries in the European Union and the United States, and their increased imports of Chinese products thanks to fiscal stimulus measures.

“In addition, a majority of manufacturing employees (in China) chose to stay put over the Lunar New Year holidays,” the statement said. “Our survey showed a lot of firms in export-oriented provinces stayed open, and orders that usually only get delivered after the new year had been delivered normally.”

Chinese factory activity usually goes dormant during the Lunar New Year break, which fell in the middle of February this year, as workers return to their hometowns. This year, the government appealed to workers to avoid travelling to curb the risk of a spread of the coronavirus.

In January-February, imports increased 22.2% from a year earlier, above the 15% forecast, partly due to stockpiling of semiconductors and energy products, according to customs.

China posted a trade surplus of $103.25 billion for the first two months. Analysts had expected the trade surplus to narrow to $60.15 billion from $78.17 billion in December.

‘NORMAL YEARS’

In yuan terms, exports rose 50.1% in the two months from a year earlier, while imports gained 14.5%.

“Due to the impact of the new coronavirus, overall trade (in yuan terms) in January-February last year fell 9.7%, and the low base was one of the reasons for the larger increase this year,” customs said. “But even when compared with normal years, such as the comparable periods in 2018 and 2019, growth in China’s overall trade was around 20%.”

China’s economy expanded 2.3% last year, helped by solid demand for Chinese-made goods such as medical and work-from-home equipment, although the growth was its weakest in 44 years.

This year, China has set a modest growth target of at least 6%, planning a careful course out of a year disrupted by COVID-19 and amid heightened tensions with the United States.

China’s trade surplus with the United States stood at $51.26 billion in January-February. Chinese customs did not give a monthly breakdown. The surplus was $29.92 billion in December.

Katherine Tai, President Joe Biden’s nominee to be U.S. trade representative, said last week she would work to fight a range of “unfair” Chinese trade and economic practices.



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China sets ‘low bar’ for GDP growth, pledges more jobs By Reuters

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© Reuters. General view shows the traffic during the evening rush hour in Beijing

By Stella Qiu and Kevin Yao

BEIJING (Reuters) – China on Friday set a modest annual economic growth target, at above 6%, and pledged to create more jobs in cities than last year, as the world’s second-biggest economy planned a careful course out of a year disrupted by COVID-19.

In 2020, China dropped a gross domestic product growth target from the premier’s work report for the first time since 2002 after the pandemic devastated its economy. China’s GDP expanded 2.3% last year, the weakest in 44 years but making it the only major economy to report growth.

“As a general target, China’s growth rate has been set at over 6% for this year,” Premier Li Keqiang said in his 2021 work report. “In setting this target, we have taken into account the recovery of economic activity.”

But the 2021 target was significantly below the consensus of analysts, who expect growth could beat 8% this year. Chinese shares fell.

China’s conservative growth target reflects a public effort to demonstrate a return to economic stability after last year’s COVID-19 upheaval, policy advisers said, while also keeping a lid on appetite for debt and risk.

“It’s obvious this year’s growth will be over 6%. The purpose is to tell people that we should focus on higher quality growth,” Yao Jingyuan, an adviser to China’s cabinet, told Reuters.

While the low GDP target does not mean the government will rush to tighten policy, with many parts of the economy still struggling, it will give planners more room to push reforms.

Premier Li pledged to spur domestic consumption and innovation, as part of a plan to reduce reliance on overseas markets and technology for long-term development.

As such, China plans to boost annual research and development spending by more than 7% every year until 2025. [L2N2L304E]

“The target should be a bottom line. We should have more room for pushing forward difficult reforms,” said Xu Hongcai, deputy director of the economic policy commission at China Association of Policy Science.

In 2021, China will aim to create more than 11 million new urban jobs, Li said in his report delivered at the opening of this year’s meeting of parliament, up from last year’s goal of over 9 million and in line with recent years.

‘QUITE GRAVE’

The government is targeting a 2021 budget deficit of around 3.2% of GDP, less than a goal of above 3.6% last year, though giving room to fund infrastructure and aid small firms.

Iris Pang, chief economist for Greater China at ING, said continued fiscal latitude was a more meaningful target than the growth target.

“The very low GDP growth target is like there is no target at all because the consensus is 8% and my forecast is 7%,” Pang told Reuters.

“I believe that most of the money will be used for technology R&D and continue to provide some buffer for job stability just in case COVID will have a comeback,” she added.

The quota on local government special bond issuance was set at 3.65 trillion yuan ($563.65 billion), down from 3.75 trillion yuan last year.

China also has no plan to issue special treasury bonds this year, having issued such bonds for the first time in 2020 to support the economy.

The outlook for government revenue and expenditure this year is “quite grave” given the modest availability of funds as spending rises, China said in its annual budget report, also released on Friday.

The government set its 2021 target for consumer price inflation at around 3%. Consumer prices rose an annual 2.5% last year, undershooting a target of around 3.5%.

In a five-year plan released separately on Friday, China omitted any GDP growth target for 2021-2025–in contrast to the 6.5% set for the 2016-2020 plan–but it said it would keep its average annual growth over the next five years in a “reasonable” range.

Annual growth in disposable income per capita over the next five years will be “in line with GDP growth”, compared with a 2016-20 goal of over 6.5%, according to the plan.

There was also no target for job creation over the next five years, though the government said the urban jobless rate will be kept under 5.5%.

($1 = 6.4756 )



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Asian stocks bounce as bond market calms By Reuters

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© Reuters. A passersby wearing a protective face mask is reflected on screen displaying the Japanese yen exchange rate against the U.S. dollar and stock prices at a brokerage, amid the coronavirus disease (COVID-19) outbreak, in Tokyo

By Wayne Cole

SYDNEY (Reuters) – Asian shares firmed on Monday as some semblance of calm returned to bond markets after last week’s wild ride, while progress in the huge U.S. stimulus package underpinned optimism about the global economy.

China’s official manufacturing PMI out over the weekend missed forecasts, but investors are counting on better news from a raft of U.S. data due this week including the February payrolls report.

Also helping sentiment was news deliveries of the newly approved Johnson & Johnson (NYSE:) COVID-19 vaccine should start on Tuesday.

MSCI’s broadest index of Asia-Pacific shares outside Japan edged up 0.1%, after shedding 3.7% last Friday.

rallied 2.0%, while NASDAQ futures bounced 0.8% and 0.7%.

Yields on U.S. 10-year notes came off to 1.40%, from last week’s peak of 1.61%, though they still ended last week 11 basis points higher and were up 50 basis points on the year so far.

“The bond moves on Friday still feel like a pause for air, rather than the catalyst for a move towards calmer waters,” said Rodrigo Catril, a senior strategist at NAB.

“Market participants remain nervous over the prospect of higher inflation as economies look to reopen aided by vaccine roll outs, high levels of savings along with solid fiscal and monetary support.”

Analysts at BofA noted the bond bear market was now one of the most severe on record with the annualised price return from 10-year U.S. govt bonds down 29% since last August, with Australia off 19%, the UK 16% and Canada 10%.

The rout owed much to expectations of faster U.S. growth as the House passed President Joe Biden’s $1.9 trillion coronavirus relief package, sending it to Senate.

BofA’s U.S. Economist Michelle Meyer lifted her forecast for economic growth to 6.5% for this year and 5% next, due to the likelihood of the larger stimulus package, better news on the virus front and encouraging data.

Virus cases were also down 72% since a Jan. 12 peak and hospitalizations are following closely behind, BofA added.

Higher U.S. yields combined with the general shift to safety helped the rebound to 90.917 from a seven-week low of 89.677.

Early Monday, the euro was holding at $1.2086, compared to last week’s peak of $1.2242, while the dollar held near a six-month top on the yen at 106.50.

“Riskier” currencies and those exposed to commodities bounced a little after taking a beating late last week, with the Australian and Canadian dollars up and emerging markets from Brazil to Turkey looking steadier.

Non-yielding gold was still nursing losses after hitting an eight-month low on Friday en route to its worst month since November 2016. It was last at $1,737 an ounce, just above a trough around $1,716.

Oil prices extended their gains ahead of an OPEC meeting this week where supply could be increased. gained 4.8% last week and WTI 3.8%, while both were about 20% higher over February as a whole. [O/R]

Brent was last up 92 cents to $65.34, while rose 97 cents to $62.47 per barrel.



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Asian markets roiled by global bond whiplash By Reuters

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2/2

© Reuters. Pedestrians are reflected in an electronic board displaying various stock prices at a brokerage in Tokyo

2/2

By Wayne Cole and Swati Pandey

SYDNEY (Reuters) – Asian stocks fell by the most in nine months on Friday as a rout in global bond markets sent yields flying and spooked investors amid fears the heavy losses suffered could trigger distressed selling in other assets.

In a sign the gloomy mood will reverberate across markets, European and U.S. stock futures were a sea of red. Eurostoxx 50 futures lost 1.7% while futures for and those for London’s dropped 1.3% each.

MSCI’s broadest index of Asia-Pacific shares outside Japan slid more than 3% to a one-month low, its steepest one-day percentage loss since May 2020.

For the week the index is down more than 5%, its worst weekly showing since March last year when the coronavirus pandemic had sparked fears of a global recession.

Friday’s carnage was triggered by a whiplash in bonds.

The scale of the sell-off prompted Australia’s central bank to launch a surprise bond buying operation to try and staunch the bleeding.

Yields on the 10-year Treasury note eased back to 1.538% from a one-year high of 1.614%, but were still up a startling 40 basis points for the month in the biggest move since 2016.

“Bond yields could still go higher in the short term though as bond selling begets more bond selling,” said Shane Oliver, head of investment strategy at AMP (OTC:).

“The longer this continues the greater the risk of a more severe correction in share markets if earnings upgrades struggle to keep up with the rise in bond yields.”

Markets were hedging the risk of an earlier rate hike from the Federal Reserve, even though officials this week vowed any move was long in the future.

Fed fund futures are now almost fully priced for a rise to 0.25% by January 2023, while Eurodollars have it discounted for June 2022.

Even the thought of an eventual end to super-cheap money sent shivers through global stock markets, which have been regularly hitting record highs and stretching valuations.

“The fixed income rout is shifting into a more lethal phase for risky assets,” says Damien McColough, Westpac’s head of rates strategy.

“The rise in yields has long been mostly seen as a story of improving growth expectations, if anything padding risky assets, but the overnight move notably included a steep lift in real rates and a bringing forward of Fed lift-off expectations.”

shed 3.7% and Chinese blue chips joined the retreat with a drop of 2.5%.

EMERGING STRAINS

Overnight, the Dow fell 1.75%, while the lost 2.45% and the Nasdaq 3.52%, the biggest decline in almost four months for the tech-heavy index.

Tech darlings all suffered, with Apple Inc (NASDAQ:), Tesla (NASDAQ:) Inc, Amazon.com Inc (NASDAQ:), NVIDIA Corp (NASDAQ:) and Microsoft Corp (NASDAQ:) the biggest drags.

All of that elevated the importance of U.S. personal consumption data due later on Friday, which includes one of the Fed’s favoured inflation measures.

Core inflation is actually expected to dip to 1.4% in January, which could help calm market angst, but any upside surprise would likely accelerate the bond rout.

The surge in Treasury yields also caused ructions in emerging markets, which feared the better returns on offer in the United States might attract funds away.

Currencies favoured for leveraged carry trades all suffered, including the Brazil real, Turkish lira and South African rand.

The flows helped nudge the U.S. dollar up more broadly, with the rising to 90.371. It also gained on the low-yielding yen, briefly reaching the highest since September at 106.42. The euro eased a touch to $1.2152.

The jump in yields has tarnished gold, which offers no fixed return, and dragged it down to $1,760.8 an ounce from the week’s high around $1,815.

However, analysts at ANZ were more bullish on the outlook.

“We now expect U.S. inflation to hit 2.5% this year,” they said in a note. “Combined with further depreciation in the U.S. dollar, we see gold’s fair value at $2,000/oz in the second half of the year.”

Oil prices dropped on a higher dollar and expectations of more supply.[O/R]

fell 67 cents to $62.86 per barrel and also lost 67 cents to $66.21.



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Bitcoin hits fresh high | Reuters

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FILE PHOTO: A representation of virtual currency Bitcoin is seen in this illustration taken November 19, 2020. REUTERS/Dado Ruvic/Illustration/File Photo

(Reuters) – Bitcoin continued gaining on Sunday, rising to a fresh high and extending a two-month rally that took its market capitalization above $1 trillion on Friday.

The world’s most popular cryptocurrency rose to a record $58,354, taking its weekly gain to around 20%. It has surged around 100% this year.

Bitcoin’s gains have been fueled by evidence it is gaining acceptance among mainstream investors and companies, such as Tesla Inc, Mastercard Inc and BNY Mellon.

Reporting by Megan Davies in New York; Editing by Daniel Wallis

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World stocks look to extend bull run to 12th day on economic optimism By Reuters

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© Reuters. FILE PHOTO: A man stands on an overpass with an electronic board showing Shanghai and Shenzhen stock indexes in Shanghai

By Hideyuki Sano

TOKYO (Reuters) – Global shares held firm on Tuesday, with a solid foundation in place to extend their bull run to a 12th consecutive session as optimism about the global economic recovery and expectations of low interest rates drive investments into riskier assets.

Oil prices soared to a 13-month high as a deep freeze due to a severe snow storm in the United States not only boosted power demand but also threatened oil production in Texas.

MSCI’s broadest index of Asia-Pacific shares outside Japan ticked up 0.1% while rose 0.4% to a 30-year high.

The mainland Chinese markets will remain closed for Lunar New Year through Wednesday while Wall Street was also closed on Monday.

futures traded 0.5% higher to a record level and MSCI’s all country world index (ACWI), which has risen every single day so far this month, ticked up slightly.

“Global markets have started the week higher as investors remain confident that the pandemic will soon give way to an economic boom,” wrote Mihir Kapadia, chief executive of Sun Global Investments in London.

“Unless any drastic moves take place this week, we could expect equity markets to remain strong.”

Successful rollouts of COVID-19 vaccines in many countries are raising hopes of further recovery in economic activities hampered by range of anti-virus curbs.

U.S. President Joe Biden is pushing ahead with his plan to pump an extra $1.9 trillion in stimulus into the economy, in a further boost to market sentiment.

“The pace of the market’s rally has been pretty fast but there’s no denying that it’s pretty comfortable time for stocks with expectations of low interest rates helping inflows to stocks,” said Masahiro Ichikawa, chief strategist at Sumitomo Mitsui (NYSE:) DS Asset Management.

The bullish view on the economy lifted bond yields, with the 10-year U.S. Treasuries gaining 5 basis points to 1.252% in early Asian trade, its highest since late March.

Investors are looking to the minutes from the U.S. Federal Reserve’s January meeting, due to be published on Wednesday, for confirmation of its commitment to maintain its dovish policy stance over the near future. That in turn is set to keep a tab on bond yields.

But some analysts say investors should keep a wary eye on bond yields.

“If U.S. bond yields keep rising, that could start to unsettle stocks,” said Sumitomo Mitsui Asset’s Ichikawa.

Oil prices soared to their highest in about 13 months as a U.S. winter storm added fuel to their rally on hopes of further demand recovery.

futures traded up 1.1% at $60.11 per barrel.

Prices have rallied over recent weeks on tightening supplies, largely due to production cuts from the Organization of the Petroleum Exporting Countries (OPEC) and allied producers in the wider OPEC+ group of producers.

Rising oil prices supported commodity-linked currencies such as the Canadian dollar while safe-haven currencies including the U.S. dollar took a back seat.

The British pound held firm at $1.3910, staying at its highest levels since April 2018.

The offshore hit a 2-1/2-year high of 6.4010 per dollar overnight and last stood at 6.4032.

MSCI’s emerging market currency index hit a record high as well.

The yen weakened to 105.36 per dollar, edging closer to its four-month low of 105.765 set on Feb. 5. while the euro was little changed at $1.2129.

traded at $48,204, near its record high of $49,715 hit on Sunday.



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Asia stocks hold at highs, sustained by bottomless stimulus By Reuters

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© Reuters. FILE PHOTO: A man wearing a protective face mask talks on his mobile phone in front of a screen showing the Nikkei index in Tokyo

By Wayne Cole

SYDNEY (Reuters) – Asian shares rested at record highs on Thursday as investors digested recent meaty gains, while bulls were sustained by the promise of endless free money after a benign reading on U.S. inflation and a dovish Federal Reserve outlook.

Adding to the torpor was a lack of liquidity as markets in China, Japan, South Korea and Taiwan were all on holiday.

MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.1%, having already climbed for four sessions to be up over 10% so far this year.

was shut after ending at a 30-year peak on Wednesday, while Australia’s main index held near an 11-month top.

With China off, there was little reaction to news the Biden administration will look at adding “new targeted restrictions” on certain sensitive technology exports to the Asian giant and would maintain tariffs for now.

Futures for the and NASDAQ were both steady, having hit historic highs on Wednesday. EUROSTOXX 50 futures and futures barely budged.

Still, the outlook for more global stimulus got a major boost overnight from a surprisingly soft reading on core U.S. inflation, which eased to 1.4% in January.

Federal Reserve Chair Jerome Powell said he wanted to see inflation reach 2% or more before even thinking of tapering the bank’s super-easy policies.

Notably, Powell emphasised that once pandemic effects were stripped out, unemployment was nearer 10% than the reported 6.3% and thus a long way from full employment.

As a result, Powell called for a “society-wide commitment” to reducing unemployment, which analysts saw as strong support for President Joe Biden $1.9 trillion stimulus package.

Indeed, Westpac economist Elliot Clarke estimated over $5 trillion in cumulative stimulus, worth 23% of GDP, would be required to repair the damage done by the pandemic.

“Historical experience provides strong justification to only act against undesired inflationary pressures once they have been seen, after full employment has been achieved,” he said.

“To that end, financial conditions are expected to remain highly supportive of the U.S. economy and global financial markets in 2021, and likely through 2022.”

The mix of bottomless Fed funds and a tame inflation report was a salve for bond market pains, leaving 10-year yields at 1.12% from a 1.20% high early in the week.

That in turn weighed on the U.S. dollar, which slipped to 90.395 on a basket of currencies and away from a 10-week top of 91.600 touched late last week.

The dollar eased to 104.57 yen, from a recent peak of 105.76, while the euro rallied to $1.2122 from its low of $1.1950.

In commodity markets, gold was sidelined at $1,838 an ounce as investors drove platinum to a six-year peak on bets of more demand from the automobile sector. [GOL/]

Oil prices took a breather, having enjoyed the longest winning streak in two years amid producer supply cuts and hopes vaccine rollouts will drive a recovery in demand. [O/R]

“The current price levels are healthier than the actual market and entirely reliant on supply cuts, as demand still needs to recover,” cautioned Bjornar Tonhaugen of Rystad Energy.

futures eased back 40 cents to $61.07, while dipped 36 cents to $58.32 a barrel.



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