· The dollar touched a three-month high against the yen on Monday, as investors bet the overwhelming election victory for Japan’s ruling party would mean a continuation of “Abenomics,” the ultra-easy policies that have kept downward pressure on the yen.
The dollar gained as much as half a percent to 114.10 yen JPY=EBS on the EBS trading platform, its strongest since July 11. It was last up 0.1 percent at 113.69 yen.
The dollar index .DXY was last up 0.22 percent at 93.910, below a session peak of 94.017.
The greenback traded close to a 2-1/2 week high against a basket of six major currencies .DXY. Traders have been speculating that the next head of the Federal Reserve could take a more hawkish stance on monetary policy.
· Renewed expectations of federal tax cuts have also supported the greenback and stoked a rise in U.S. bond yields, with two-year yields reaching a near nine-year peak at 1.589 percent US2YT=RR.
· U.S. President Donald Trump said on Monday he is “very, very close” to making his decision on who should chair the Fed and was considering at least three people: Federal Reserve Governor Jerome Powell, Stanford University economist John Taylor and current Fed Chair Janet Yellen. [nL2N1MY0YO]
Trump is expected to announce his nominee for Fed chair before he leaves for his Asia trip beginning on Nov. 3.
· To be sure, if Trump ends up picking Yellen, the yield curve would steepen, led by a drop in short-dated yields as the Fed would stick with a cautious stance regarding raising rates, analysts said.
· Whether President Donald Trump decides to reappoint Janet Yellen as Fed chair or selects someone else, the central bank will continue to hike interest rates and run down its massive balance sheet, a portfolio manager says.
"In the short term, it really doesn't matter who it is, because the Federal Reserve will continue to raise interest rates by we believe three times over the course of the next 12 months," Washington Crossing Advisors' Chad Morganlander said on CNBC's "Trading Nation."
· President Donald Trump on Monday dismissed the possibility of curbing a popular tax-deferred U.S. retirement savings program to help pay for his sweeping tax cuts, and voiced doubts about adding another top bracket targeting the wealthiest Americans.
· The euro fell 0.4 percent to $1.17420 EUR=EBS, holding below a 2-1/2-year peak of $1.2092 reached on Sept. 8, on anxiety about Madrid's handling of civil unrest in Catalonia following a referendum on the region's independence on Oct. 1.
The single currency was on its back foot ahead of a European Central Bank policy meeting on Thursday. Traders were betting on a more hawkish stance from the ECB offset by hints it is not in a rush to tighten policy.
· The Spanish government has urged Catalans to accept Madrid's decision to dismiss their secessionist leadership and to take control of the restive region, as the nation's biggest political crisis in decades enters a decisive week.
Madrid took the unprecedented step of firing the government of Catalonia on Saturday in a last resort to thwart its push for independence. Catalan leaders called for civil disobedience in response.
· The populism threat in Europe continues to worry investors despite a string of election results that suggested the movement was in decline, according to the CEO of Chantico Global.
At the beginning of the year, possible far-right election victories in the Netherlands, France and Germany were perceived as the biggest threat to European politics. However, wins by established parties in each country eased populist fears.
· China's central bank chief just warned about a potential bubble in China: Rising household debt.
"Regarding household debt levels, China doesn't rank that high on a global scale, but the pace of growth has picked up in the last few years," People's Bank of China governor Zhou Xiaochuan said Thursday. He didn't expect any action should be taken immediately but said the debt levels should be monitored for quality and a steady pace of growth.
The bigger worry about China has been high levels of corporate and local government debt. The Chinese government has spoken about the need to limit that growth, and most analysts expect authorities will gradually rein it in. But this year, household debt has arisen as another area of concern about financial leverage in China.
"China's household debt has been rising at an 'alarming' pace over the past two years," Citi analyst Li-Gang Liu said in an Oct. 10 note. The report pointed out that outstanding household debt in China has doubled from 29.6 percent of gross domestic product at 16 trillion yuan ($2.41 trillion) in 2012 to 44.3 percent of GDP at 33 trillion yuan last year.
· Oil prices were little changed on Monday as supply disruptions in Iraq dented exports by OPEC’s second-largest producer and U.S. drilling rates showed a slowdown.
Brent crude LCOc1 settled at $57.37 a barrel, down 38 cents. U.S. West Texas Intermediate (WTI) crude CLc1 ended the session up 6 cents at $51.90 a barrel.
· Oil exports from southern Iraq have fallen by 110,000 barrels per day this month, according to shipping data and an industry source, adding to the drop in flows caused by a shortfall from the northern Kirkuk fields.
· The number of U.S. rigs drilling for new oil fell by seven to 736 in the week to Oct. 20, the lowest level since June, energy services firm Baker Hughes said on Friday. RIG-OL-USA-BHI
Reference: Reuters, CNBC
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